Welfare distribution between EU Member States through different national decoupling options - Implications for Spain

Resumen

This paper makes use of an agricultural sector model to analyse welfare effects derived from different national implementation options of the CAP Reform 2003. It shows that agricultural prices developed more favourable in a full premium decoupling scenario, since agricultural production declines more pronounced compared to a partial decoupling scenario. The use of the partial decoupling mechanism helps Member States to distribute income into less favoured areas but is not the optimal policy choice. However, if other Member States follow the same path of reform, a ‘prisoner’s dilemma’ will most likely be observed: partial decoupling appears as the preferred option for individual Member States, since high domestic production and high producer prices would be expected, but this would lead to welfare losses for consumers and taxpayers.