The heterogeneous farm-level impact of the 2005 CAP-first pillar reform: A multivalued treatment effect estimation

This article aims to evaluate the impact of the 2005 reform of the Common Agricultural Policy (CAP) on farm production choices as a treatment effect (TE). This impact is measured through alternative metrics of the short-term changes of the output vector. The heterogeneity of the response to the reform is assessed by estimating both average and quantile TE. As this heterogeneous response may depend on the different farm-level CAP support, a multivalued treatment approach is adopted and applied to treated units (i.e., supported farms). This approach is applied to a balanced panel of Italian FADN farms observed over years 2003-2007. Results show that the 2005 reform of the first pillar of the CAP actually had an impact in (re)orienting short-term farm production choices but this response is largely heterogeneous and concentrated in the lower levels of support.