Employment effects of CAP payments in the UK non-farm economy

This paper investigates the CAP payment effects on employment in the non-farm SMEs, which are central for job creation. It examines whether there are differences in the effect by business location, industry grouping, and CAP Pillars. A microeconomic approach is employed, based on firm data from FAME dataset combined with detailed subsidies information from DEFRA. System GMM is used to estimate the effect of CAP payments in both static and dynamic models of employment. Results suggest positive net spillovers of CAP payments to non-farm employment. Although the magnitude of the effect is small, it is economically significant.