The Impact of the 2005 CAP First Pillar Reform as a Multivalued Treatment Effect: Alternative Estimation Approaches

This paper aims at evaluating the impact of the 2003/2005 CAP reform on farm production choices. The outcome of “market orientation” is measured by considering both the short-term production choices and the long-term investment decisions. The Treatment Effect (TE) is estimated through recent alternative multiple/continuous TEs estimators based on the Generalized Propensity Score (GPS). Instead of looking at non-treated counterfactuals these approaches take advantage of the different intensity with which the first pillar support is delivered to treated units. These alternative estimators are implemented and their statistical robustness assessed and results compared. Results show that the 2003/2005 reform of the first pillar of the CAP actually had an impact more in (ri)orienting short-term farm production choices then investment decisions and this effect is significantly more evident for farms with a limited contribution of the CAP on their own Gross Production Value.