Impact of the CAP's Second Pillar Budget Reform on the Czech Economy

Abstract

In this paper, three scenarios concerning different budget options of the reformed CAP are analysed based on the general equilibrium approach. The simulations consider a policy shock in 2014 and assess its impact until 2020. The results suggest that the changes in financing the second pillar CAP will produce only marginal effects on the economy. However, the reallocation of funds from the first to the second pillar has considerably larger negative effects on gross value added and employment in agriculture than the case of the second pillar budget reduction. On the other hand, the reallocation of funds will produce small but positive effects on the remaining sectors of the economy and the GDP.Research presented in this paper is the result of a research grant MSM 6046070906 “Economics of Czech agricultural resources and their efficient usage within the framework of multifunctional agri-food systems” and a Research Task of UZEI conducted for the Ministry of Agriculture TÚ 4241/2011”.