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Abstract
The debate on reforming the Common Agricultural Policy (CAP) after 2020 has already started by when the European Commission published its own vision on the future of agriculture and food production in the European Union (European Commission, 2017). This Communication paper set the political arena. One of the key aspects of this debate relates to the revision of the system of EU direct payments to farmers. These payments which supplement incomes from farming have an overwhelming share in the budget assigned to Pillar I of the CAP. The fine tuning of the degressieve reduction and the capping of direct payments is to be part of the new reform package. Although it has, for a long time, been a popular idea to limit payments to larger farms in one way or another, and subsidise smaller agricultural holdings instead, new evidence from Hungary suggests that placing a cap on direct payments may cause more harm than good in terms of land use change.