MODROL : An Econometric Model for Analyzing and Forecasting the Impact of the EU CAP Instruments on Polish Agriculture

The paper presents the general outline and the most important results from an econometric model MODROL, developed by the authors, for analyzing and forecasting the impact from the instruments of the Common Agricultural Policy of the European Community on the Polish agricultural sector. The basic assumptions in constructing the model was that it be kept possibly simple and be based on empirical data rather than on some overall theoretical structure. The results reported show that there has indeed been a significant impact from CAP on those agricultural markets, for which statistically significant models could be identified (cereals, meat, with subdivisions). Yet, this impact is of quite a differentiated character. Summarizing, two important conclusions were drawn: (1) due to CAP-related direct subsidies the revenues from farming have been considerably higher than without, which resulted in maintenance of farming activities within quite a proportion of farms and on quite a share of agricultural land; and (2) this increase of revenues was often associated with the increase of prices. The essential consequences of application the CAP instruments pertain then to: (i) preservation of farming activities, but also preservation of the largely noncompetitive and subsistence structures; (ii) while this might be seen as a by-product of effective “decoupling”, and, also in positive terms, as environmentally plausible, (iii) it certainly poses problems as to the true-to-life economic and social sustainability of farming, especially under changing conditions