CAP reform between equity and targeting: a structural policy analysis for Italy

A model grounded on a social accounting matrix for Italy, adapted for an analysis of agriculture, is used to assess the distributive impacts of changes to the single payment scheme after the Common Agricultural Policy Health Check. The main goal of the analysis is to bring out how and to what extent the distributive outcomes of support are affected by the structural relations existing among production activity, factor ownership and the distribution of income from farming among households. A particular manipulation, the singular value decomposition, of the matrix of income multipliers is used to highlight the major trade-offs, implicit in the structure of the economy, between the support to different farm types and the impact on incomes of different households groups. The results outline the existence of a structural trade-off between targeting and equity in supporting Italian agriculture through payments to farms and suggest flexibility in the application of reformed payments according to different distributive features of agriculture in member countries. JEL classification: Q18, D57, D30