MODELING THE RURAL-URBAN EFFECTS OF CHANGES IN AGRICULTURAL POLICIES: A BI-REGIONAL CGE ANALYSIS OF TWO CASE STUDY REGIONS

The paper uses bi-regional CGE models to analyse the effects of a change in agricultural support on two (very different) case study regions, one within Scotland, the other in Greece. Both regions are predominantly rural in nature but contain an urban centre as well as a rural hinterland. The results show qualitative and quantitative differences in the total effects in both regions as well as differences in the distribution of effects between their rural and urban parts. In particular, the negative effects of a reduction in price support are contained within rural primary sectors in the Scottish region: nonfarm rural sectors and urban sectors all benefit from the policy shock. In contrast, the negative impacts of a reduction in price support are more widely spread in the Greek region, with losers in both the urban and rural areas. These result are attributed to the stronger links between agriculture and first stage processing sectors in the Greek study area and also the ownership of agricultural factors by urban residents. Full decoupling at the regional level is shown to have negative aggregate effects in both study regions, driven by the high import intensity of household commodities. Again however there are gainers as well as losers from the policy shock suggesting a case for spatially and sectorally targeted support to alleviate the potentially negative effects of CAP reform at a regional level.