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Abstract
The introduction of decoupled direct payments in the EU was a substantial change of
the Common Agricultural Policy (CAP) in 2003. After decoupling direct payments from
production, it has become evident, that distributional objectives are the major justification of
farm payments. There are three facets: the distribution of payments among farmers within
member states, the distribution of payments among member states, and the distribution of
household incomes within member states. All of them will be affected if the volume and
allocation of funds for the CAP will be changed in the new financial framework of the EU.
The paper addresses the first distributional aspects. We provide an overview of the
development of past and present research and findings on the distributional aspects of direct
payments. We use the theory of federal fiscal relations to identify the policy agendas that
should be handled at the EU level, at national levels, and at sub-national levels. We analyse
how measures of concentration are affected if the criteria of direct payments are changed (e.g.
a modified modulation scheme). This allows us to identify potential consequences after
changing the way direct payments are distributed within EU member states. The summary of
the paper discusses the distributional consequences of scenarios of the coming financial
framework as far as agriculture is concerned.