The impact of EU’s financial support on the agriculture’s development: a panel data analysis

Abstract The Common Policies represent one of the fundamental values of European Integration process. Started from coal, steel and energy, the EU common policies were significantly extended overtime. The aim of this study is to analyze the Common Agriculture Policy (CAP) from the perspective of the financing instruments for the members. The paper studies the evolution of these funds overtime, highlighting the major changes and shifts in the priorities and goals of them, their direct impact on the main sectors (including rural area) and the implication of EU enlargement on this important policy. The paper includes a cross-sector panel analysis at the level of European Union and Euro Area on the impact of the net subsidies granted to agriculture and the production volume of this sector overtime. The empirical findings confirmed a positive impact of these net subsidies on the production volume of agro-sectors and the long-run relationship between the tested variables. However, the use of 3 years lags revealed a negative and statistically significant relationship between the dynamic of net subsidies and the production volume for EU and Euro area aggregated production volume dynamic. The analysis gives us the possibility to capture the main tendencies and trends and to draw important conclusions for the further developments of the EU agriculture as the subject of this common policy.