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The economic cost of the CAP revisited

Lookup NU author(s): Dr George Philippidis, Dr Lionel Hubbard


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This paper reports estimates of the domestic economic cost of the common agricultural policy (CAP) from computable general equilibrium simulations which incorporate imperfect competition in the non-primary sectors, as well as explicit modelling of agricultural protection. Imperfect competition is characterised to include hierarchical preferences, addressing the notion of varietal diversity as an important decision variable in consumer behaviour. Results indicate that repeal of the CAP would reduce varietal diversity in food processing in the EU, causing utility losses. However, these would be countered by positive varietal effects in other sectors and by strong allocative effects. The net cost of the CAP to the EU is estimated at 0.2% of gross domestic product (GDP). For an individual member state the cost can be considerably larger, as with the UK where the estimate is above 0.5% of GDP. (C) 2001 Elsevier Science BN. All rights reserved.

Publication metadata

Author(s): Hubbard LJ; Philippidis G

Publication type: Conference Proceedings (inc. Abstract)

Publication status: Published

Conference Name: Agricultural Economics: 14th Triennial Congress of the International Association of Agricultural Economists

Year of Conference: 2001

Pages: 375-385

ISSN: 0021-857X

Publisher: Wiley-Blackwell Publishing, Inc.


DOI: 10.1111/j.1574-0862.2001.tb00216.x

Library holdings: Search Newcastle University Library for this item

ISBN: 15740862