Enlargement Agenda - Special focus on Macedonia, Serbia and Kosovo. CEPS Commentary, 27 March 2013

This CEPS Commentary notes that this is a critical time for the EU’s enlargement agenda with competing interests at play – between those who suggest that further enlargement is a heavy burden that the EU can ill afford in the current economic climate, and others who continue to believe that extending the frontiers of peace and security to include the Balkan countries will make the EU a safer place. To counter the naysayers, Erwan Fouéré underlines the importance for the EU to show that its current strategy continues to deliver dividends, as it certainly does in the case of Kosovo and Serbia. He further advises the EU to be ready to adapt its strategy where necessary, as in the case of Macedonia, by using whatever leverage it has in a more direct and consistent way and ensuring that its policy objectives and strategy in this area are based on the progress assessment narrative and not the other way around. In his view, opening accession negotiations with Macedonia will be the only way to prevent the country from sinking into further political instability.

Influence of the Common Agricultural Policy and Heterogeneous Land Quality on Land Rent and Land Allocation. Factor Markets Working Paper No. 38, March 2013

Against the background of the current discussion about the EU’s common agricultural policy (CAP) after 2013, the question of the impact of government support on land prices is crucially important. Validation of the CAP’s success also hinges on a proper assessment of a choice of policy instruments. This study therefore has the objective of investigating on a theoretical basis the effects of different government support measures on land rental prices and land allocation. The different measures under consideration are the price support, area payments and decoupled single farm payments (SFPs) of the CAP. Our approach evaluates the potential impact of each measure based on a Ricardian land rent model with heterogeneous land quality and multiple land uses. We start with a simple model of one output and two inputs, where a Cobb-Douglas production technology is assumed between the two factors of land and non-land inputs. In a second step, an outside option is introduced. This outside option, as opposed to land use of the Ricardian type, is independent of land quality. The results show that area payments and SFPs become fully capitalised into land rents, whereas in a price support scheme the capitalisation depends on per-acreage productivity. Moreover, in a price support scheme and a historical model, the capitalisation is positively influenced by land quality. Both area payments and price supports influence land allocation across different uses compared with no subsidies, where the shift tends to be larger in an area payment scheme than in a price support scheme. By contrast, SFPs do not influence land allocation.