Rural development and welfare implications of CAP reforms

Common Agricultural Policy (CAP) has been evolving from a sectoral policy of farmcommodity support into an integrated policy for rural development and environmental enhancement.Rural development policy is closely linked to two concepts: diversity (multifunctionality)and sustainability as achieving optimal diversity at community level is a keyin the rural development problem. In this paper rural development at community level andthe impact of support redistribution, resulting from recent CAP reforms, are analyzed in theframework of privately provided public goods. It is shown that CAP support redistributioncan importantly impact rural community development and household welfare, conditionalon households’ technology (opportunity costs) of contributing to development, their currentlevels of contribution, and the form of community development function.