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Abstract
This study is concerned with measuring impacts of the Common Agricultural Policy (CAP) on
farm income distribution of western Germany. Not only the sheer contribution of market price
support and direct payments as a proportion of income is taken into account, but also the impact
of support on production incentives. For this purpose, we apply a modelling system consisting
of a partial equilibrium model and a programming model. Based on a comparison of
Gini coefficients and a decomposition of overall inequality effects we conclude that liberalization
of the agricultural sector leads to a more unequal distribution of family farm income in
relative terms, whereas a liberalized market provides a more equal situation in absolute
terms. Furthermore, we consider the impacts of liberalizing the agricultural market on regional
differences in average agricultural income and conclude that in relative terms liberalization
increases regional inequality.