Reallocation of Agricultural Labor and Farm Subsidies: Evidence From the EU Regions

The paper deals with the determinants of labour out-migration from agriculture across 149 EU regions over the 1990-2008 period. The central aim is to shed light on the role played by CAP payments on this important adjustment process. Using static and dynamic panel data estimators, we show that standard neo-classic drivers, like the relative income and the relative labour share, represent significant determinants of the inter-sectoral migration of agricultural labour. Overall, CAP payments contributed significantly to job creation in agriculture, although the magnitude of the economic effect was quite moderate. We also found that Pillar I subsidies exerted an effect approximately two times greater than that of Pillar II payments