One or many European models of agriculture? How heterogeneity influences income creation among farms in the European Union

Agricultural structures are quite heterogeneous across the European Union, and it is likely that the underlying technology also differs across regions. In this paper, we claim that the heterogeneity of agriculture across the EU affects the process of income creation, i.e. the relative importance of the factors of farm income differ for different agricultural models. A panel of farms representative for 125 regions reporting to the EU Farm Accountancy Data Network (FADN) over the period 2007–2018 is used. In this paper, those regions are grouped into three clusters. A system generalized method of moments (GMM) panel estimator is applied to each cluster. It showed that total factor productivity, relative prices and agricultural subsidies make different contributions to farm net value added. In particular, the income growth of farms in regions dominated by large farms seems to react more to marginal changes of the explanatory variables.

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