Institutional change in the common agricultural policy of the European Community

The Common Agricultural Policy (CAP) of the European Community (EC) is a complex institutional structure with major effects on world agriculture. This study analyzes the CAP from a public choice perspective as a case of induced institutional innovation. The demand for change is analyzed as a function of a newly enlarged Community. Time-consuming decisions, unequal distribution of net benefits, increasing budget expenditures, and rising pressures to “renationalize” farm subsidies drive the demand for change. Alternative institutional arrangements respond to these demands, which reflect preferences for fairness and equity as well as improved efficiency in the CAP.