Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2013:41: Do the CAP Subsidies Increase Employment in Sweden? Estimating the Open Economy Relative Multiplier Using an Exogenous Change in the CAP

Johan Blomquist () and Martin Nordin ()
Additional contact information
Johan Blomquist: AgriFood Economics Centre, Postal: School of Economics and Management, Lund University, Box 730, S-220 07 Lund, Sweden
Martin Nordin: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This study evaluates the impact of agricultural subsidies (CAP) on unemployment and employment outside the agricultural sector. For the CAP subsidies to have an effect outside the agricultural sector, the subsidies must have a second-order effect. Thus, the Open Economy Relative Multiplier for Sweden is estimated with aggregate municipality data for the years 2001 to 2009. A side-effect of the decupling reform in 2005 was that Sweden was forced to introduce a grassland support which redistributed the payments among the regions. This exogenous redistribution of the CAP is the identifying assumption in this study. The subsidy creates private jobs at a cost of about $20,000 per job, which is consistent with earlier estimates based on US data.

Keywords: Government Spending; Multiplier; Employment; Unemployment; CAP; Agricultural Subsidies

JEL-codes: E24; E62; Q18

27 pages, December 2, 2013

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WP13_41.pdf PDF-file 

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