Do CAP subsidies stabilise farm income in Hungary and Slovenia?

https://doi.org/10.17221/190/2018-AGRICECONCitation:Bojnec Š., Fertő I. (2019): Do CAP subsidies stabilise farm income in Hungary and Slovenia? Agric. Econ. – Czech, 65: 103-111.
download PDF

A large share of the Common Agricultural Policy (CAP) budget takes the form of subsidies for supporting and stabilising the income of European Union farmers. This paper assesses whether CAP subsidies stabilise farm income and examines how subsidies may reduce the variability of farm income over time. The analysis is developed on a constant sample of Hungarian and Slovenian Farm Accountancy Data Network farms during the period 2007–2015. It incorporates both the whole sample and farms classified according to two criteria: economic size, and the relative importance of subsidies. Farm income variability is analysed by means of variance decomposition using three main income components: market revenue income, subsidies, and the cost of external factors. Variability in farm income over time is high due to the high variability in the market revenue component. Subsidies mitigate instability in farm income because their variability is lower than that of market revenue income. While CAP subsidies thus represent a stable source of farm income, they have played a limited countercyclical role in stabilising total farm income. Subsidies are not found to be targeted at the farms that face the highest level of income variability and thus may not be an efficient tool for stabilising farm income.

References:
Bojnec Š., Fertő I. (2018): Assessing and understanding the drivers of farm income risk: evidence from Slovenia. New Medit, 17: 23–35.
 
Conover W.J., Iman R.L. (1979): On Multiple-Comparisons Procedures. Technical Report LA-7677-MS, Los Alamos Scientific Laboratory, Los Alamos.
 
El Benni N., Finger R., Mann S., Lehmann B. (2012): The distributional effects of agricultural policy reforms in Switzerland. Agricultural Economics (Zemědělská ekonomika), 58, 497-509 https://doi.org/10.17221/215/2011-AGRICECON
 
El Benni N., Finger R. (2013): Gross revenue risk in Swiss dairy farming. Journal of Dairy Science, 96, 936-948 https://doi.org/10.3168/jds.2012-5695
 
European Commission (2019): Farm Accountancy Data Network. European Commission, Brussels. Available at http://ec.europa.eu/agriculture/rica/concept_en.cfm.
 
Meuwissen M.P.M., van Asseldonk M.A.P.M., Huirne R.B.M. (eds.) (2008): Income Stabilisation in European Agriculture. Wageningen Academic Publishers, Wageningen.
 
OECD (2003): Multifunctionality – towards an Analytical Framework. OECD, Paris.
 
OECD (2009): Managing Risk in Agriculture. A Holistic Approach. OECD, Paris.
 
OECD (2017): Evaluation of Agricultural Policy Reforms in the European Union. The Common Agricultural Policy 2014–20. OECD, Paris.
 
Severini S., Tantari A., Di Tommaso G. (2016): Do CAP direct payments stabilise farm income? Empirical evidences from a constant sample of Italian farms. Agricultural and Food Economics, 4, - https://doi.org/10.1186/s40100-016-0050-0
 
Severini Simone, Tantari Antonella, Di Tommaso Giuliano (2017): Effect of agricultural policy on income and revenue risks in Italian farms. Agricultural Finance Review, 77, 295-311 https://doi.org/10.1108/AFR-07-2016-0067
 
Vrolijk H.C.J., Poppe K.J. (2008): Income variability and income crisis in the European Union. In: Meuwissen M.P.M., van Asseldonk M.A.P.M., Huirne R.B.M. (eds): Income Stabilisation in European Agriculture. Wageningen Academic Publishers, Wageningen: 33–54.
 
download PDF

© 2019 Czech Academy of Agricultural Sciences