Marginal Analysis of Income Mobility Effects by Income Source with an Application to the Agricultural Policy Mix

The Note makes novel use of a decomposition of the Shorrocks mobility index by income source to identify the impact on farm income mobility of a marginal change in each component of income. An empirical application shows that a revenue‐neutral change in the balance of agricultural protection between market‐based support and direct payments would not have reduced the variability of relative farm incomes in Scottish agriculture.     

Assessing the Impact of Direct Payments Convergence on Farm Income Inequality: The Case of Italian Farms

Abstract

This paper investigates the effects of the convergence process of direct payments (DPs) on farm income inequality. The analysis uses the Gini coefficient concept and its decomposition on the FADN Italian sample in 2014 and 2019 to assess the impact of the DPs reform in Italy. Results of the analysis show that a marginal increase in direct payments will reduce income concentration. However, a shift of resources toward mountain areas could occur. The results of the analysis have some policy implications regarding the application of the convergence mechanism of the CAP in Italy: in fact, the convergence process leads to a redistribution of resources in favour of mountain areas. These results could feed the debate on the future of CAP direct payments after 2020, when the cut or, at least, the reduction of DPs could increase income concentration.     

Effects of EU dairy policy reform for Dutch dairy farming: a primal approach using GMM estimation

This paper estimates a production function for milk using ageneralised method of moments estimator to avoid the endogeneityproblem. Using the first-order conditions for profit maximisation,the economic effects for individual Dutch dairy farms of the2003 EU dairy policy reform are analysed. With an expected milkprice decrease of 21 per cent, profit decreases on average by22 per cent. EU direct payments compensate for roughly 53 percent of this fall in profit. The profit reduction means that69 per cent of all small farms have negative income from farming,compared with 15 per cent in the initial situation.     

The Role of the Common Agricultural Policy in Enhancing Farm Income: A Dynamic Panel Analysis Accounting for Farm Size in Italy

As a multi-objective policy, the EU Common Agricultural Policy continues to secure significant income support for farmers as one of the nine specific objectives. We estimate the income transfer efficiency of a broad set of pivotal policy measures, focusing on the effects of farm structure on income transfer efficiency. We use dynamic modelling, based on a micro-data panel of Italian farms for the period 2008–2014, allowing for endogeneity, simultaneity bias, and omitted variables. In line with previous studies and economic expectations, we find that decoupled direct payments provide the highest contribution to agricultural incomes, followed by agri-environmental payments and on-farm investment subsidies. Coupled payments have no significant impacts on farmers’ income. Generally, for all analysed Common Agricultural Policy measures, large farms benefit from greater transfer efficiency levels compared with medium and small farms. These differences among instruments and across farms suggest that policy-participation costs may play a pivotal role, together with the economic structure of farms, in determining the income transfer efficiency of CAP policies.     

The impact of climate and price risks on agricultural land use and crop management decisions

This article aims to investigate the impacts of climate change and of lower and more volatile crop price levels as currently observed in the European Union (EU) on optimal management decisions, average income and income risks in crop production in Western Switzerland. To this end, a bioeconomic whole-farm model has been developed that non-parametrically combines the crop growth model CropSyst with an economic decision model using a genetic algorithm. The analysis focuses on the farm level, which enables us to integrate a wide set of potential adaptation responses, comprising changes in agricultural land use as well as crop-specific fertilization and irrigation strategies. Furthermore, the farmer's certainty equivalent is employed as objective function, which enables the consideration of not only impacts on average income but also impacts on income variability.The study shows that that the effects of EU crop prices on the optimal management decisions as well as on the farmer's certainty equivalent are much stronger than the effects of climate change. Furthermore, our results indicate that the impacts of income risks on the crop farm's optimal management schemes are of rather low importance. This is due to two major reasons: first, direct payments make up a large percentage of the agricultural income in Switzerland which makes Swiss farmers less vulnerable to market and climate volatility. Second, arable crop farms in Switzerland have by law to cultivate at least four different crops. Due to these diverse cropping systems and high government direct payments risk does neither under climate change, market liberalization nor combinations thereof, play a very decisive role in arable farming in Switzerland.     

A Partial Adjustment Model of Federal Direct Payments in Canadian Agriculture

Delays in direct payments to Canadian farmers reduce the income loss protection that is provided by federal income stabilization and related programs. This issue is examined using Statistics Canada federal direct payment and net farm income data from 1981 to 2010. An estimate of the reduced protection against farm income loss that can be attributed to payment delays is obtained using a simple partial adjustment model, first with and then without the assumption of a constant rate of adjustment over time. The results point to a highly significant reduction in program effectiveness that can be attributed to delays in direct payments. There is no evidence to support the common belief that payment delays have significantly increased since the introduction of the Canadian Agricultural Income Stabilization program in 2003.     

Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies

The European Union reformed farm policy in June 2003 towards the decoupling of farm income support instruments. Available impact studies find that this reform reduces production incentives substantially for beef and to a lesser extent for arable crops. However, these studies assume that the previous reform, under Agenda 2000, already decoupled arable crop direct payments to a considerable extent, while beef premiums were linked more closely to production. Our main objective in this paper is to test the sensitivity of these results to this questionable modelling of Agenda 2000 direct payments, which neglects eligibility rules and land market imperfections. Our analysis reveals that the effects of the reform on both arable crop and beef production are always negative, however the Agenda 2000 direct payments are modelled. On the other hand, we show that, when the eligibility rules and land market imperfections are acknowledged, the production reducing effects may be much larger for arable crops than for beef. Policy implications of these results are noted.     

A Political Economic Analysis of U.S. Rice Export Programs to Japan and South Korea: A Game Theoretic Approach

The Uruguay Round Agreement on agriculture (UR) has contributed to the increase in U.S. and world rice trade since 1994. Despite this, the Japanese and Korean rice markets continue to be characterized by high levels of trade intervention. This paper attempts to analyze both import markets incorporating econometric estimates and public choice theory in a game theoretic framework. Various scenarios are analyzed. The results show that the overall Nash equilibrium occurs with a 4% tariff reduction for Japan and Korea under the U.S. Market Development Program, which includes the Market Access Program and Foreign Market Development Program.     

The Effects of Direct Payments on Technical Efficiency of Irish Beef Farms: A Stochastic Frontier Analysis

The 2003 Mid‐Term Review of the CAP sought to refocus the EU's farm support policy to foster a more competitive and market‐orientated agricultural sector. The foundation of this reform comprised the introduction of decoupled payments to farmers, replacing the EU's previous system of supports that were directly linked to production of designated crops and livestock. This paper explores the effect of coupled payments and their subsequent replacement by decoupled support, on the technical efficiency of specialist beef farms in Ireland. Given the high reliance of beef farmers in Ireland on CAP payments, the decoupling of payments has been especially important for the sector. A stochastic production frontier is estimated using a panel dataset comprising detailed accountancy data for Irish beef farms between the years 2000 and 2013. Our results indicate that technical efficiency in the beef farming sector has been consistently poor, with an average efficiency score of only 0.53 during the period analysed. However, we found that direct income received in the form of coupled payments had a positive impact on farm efficiency, and that this positive effect was maintained after their replacement with decoupled income support.     

Agricultural commercialisation,asset growth and poverty in rural Vietnam

Poverty remains a substantial threat in rural areas of many developing countries, and solving this problem requires an in-depth understanding of the income generating capacity that determines poverty. This paper examines the impact of agricultural commercialisation on the capability of rural households to accumulate and productively use assets and reduce structural and multidimensional poverty. A longitudinal dataset of around 2000 households with a total of 9781 observations from five rural surveys undertaken in the period 2008–2017 in Vietnam is used. Results from a fixed effects regression with an instrumental variable and a control function approach show that agricultural commercialisation has a positive effect on the accumulation of assets and reduces multidimensional and structural poverty over time. However, the effect is not homogeneous and is larger for households that are not mainly engaged in rice commercialisation. This suggests that commercialisation can be a path out of poverty, especially if policy makers move towards utilising other crops instead of rice.     

A Political Economic Analysis of U.S. Rice Export Programs to Japan and South Korea: A Game-Theoretic Approach

The Uruguay Round Agreement on agriculture has contributed to the increase in U.S. and world rice trade since 1994. Despite this, the Japanese and Korean rice markets continue to be characterized by high levels of trade intervention. This article attempts to analyze both import markets incorporating econometric estimates and public choice theory in a game-theoretic framework. Various scenarios are analyzed. The results show that the overall Nash equilibrium occurs with a 4% tariff reduction for Japan and Korea under the U.S. Market Development Program, which includes the Market Access Program and Foreign Market Development Program.     

Removing border protection on wheat and rice: effects on rural income and food self‐sufficiency in China*

In this paper, I use the Monash Multi‐Country model – a dynamic Computable General Equilibrium model of China, Australia and the Rest of the World – to analyse the effects of removing border protection on wheat and rice in China. The analysis points to the possibility that removing border protection on wheat and rice may lead to an increase in rural income in China. This is mainly due to the following two factors. First, removing border protection on wheat and rice not only leads to a contraction in agricultural activities, but also leads to an expansion in manufacturing and services activities. Second, on average, rural households in China obtain over half of their income from manufacturing and services activities.     

Demand for cereal grains in Asia: the effect of urbanization

This paper analyzes the effects of urbanization on demand for cereal grains – rice, wheat, and coarse grains – in nine Asian countries. A complete demand system (Almost Ideal Demand System in linear form) is estimated in two stages based on aggregate time series data from 1960 to 1988. In the high-income countries, i.e. Japan and South Korea, urbanization was observed to significantly reduce demand for cereal grains. In the lower-income countries, demand for cereal grains cither increased or remained the same with urbanization. Among cereal grains, urbanization has had negative effects on demand for rice and coarse grains, but consistently positive effects on demand for wheat. Only Japan and Thailand among the countries studied have negative income elasticities of demand for total cereal grains and for rice in particular. Hence, rice remains a necessity and a normal good in most Asian countries. Previous estimates of income elasticities of rice based on time-series aggregate data tend to be lower than those based on cross-section household level data. When urbanization is explicitly specified in the demand model, the estimates of income elasticities from time-series data turn out to be consistent with those from cross-section data.     

Land Heterogeneity,Agricultural Income Forgone and Environmental Benefit: An Assessment of Incentive Compatibility Problems in Environmental Stewardship Schemes

This paper examines the issue of incentive compatibility within environmental stewardship schemes, where incentive payments to farmers to provide environmental goods and services are based on foregone agricultural income. The particular focus of the paper is land heterogeneity, either of agricultural or environmental value, leading to divergence between the actual and socially optimal level of provision of environmental goods and services. Given land heterogeneity, such goods and services are likely to be systematically over‐ or under‐provided in response to a flat rate payment for income foregone.     

Impacts of Decoupled Agricultural Support on Farm Structure,Biodiversity and Landscape Mosaic: Some EU Results

The decoupling of direct payments from production represents a substantial reform of the Common Agricultural Policy (CAP). Farmers are no longer required to produce commodities to be entitled to support but only to keep land in Good Environmental and Agricultural Condition. If output declines as a result, there is concern that landscape services produced jointly with commodities will also decline. The aim of this paper is to assess the long‐term effects of the 2003 reform on farm structure, landscape mosaic and biodiversity for a sample of EU regions. Impacts are quantified using a spatial agent‐based modelling approach by simulating agricultural development with links to indicators of landscape value. Our results demonstrate that eliminating the link between support payments and production has possible negative consequences for the landscape, but only under particular circumstances. It is shown that these effects could be offset by strengthening (Pillar II) agri‐environmental schemes. Further the single payment scheme results in higher land rental prices which reduces its ability to achieve its goal of providing income security for farmers. Implications of these results for the direction of continued CAP reform are discussed.     

Output and input bias effects of U.S. direct payments

This study examines the national effect of U.S. direct payments on the extent and direction of biased technical change on U.S. agriculture. We also assess the economic significance of the estimated bias effects for economic policy modeling endeavors involving a reduction of domestic support payments. A two outputs (livestock and crops) and four inputs (labor, capital, land, and material) translog cost function was estimated from national time series (1948–2011) data. Results indicate that payments do not induce output‐biased technical change. We do find evidence of Hicksian bias that is land using and material input saving attributable to support payments. Global computable general equilibrium simulations suggest that price and output effects of discontinuing direct payments are 1/4 to 1/3 the size once the bias effects are incorporated.     

Analysing Dutch dairy farmer behaviour towards the provision of public goods: The added value of an economic simulation experiment

The objective of this paper is to examine the value of experiments for assessing the impact of the proposed Common Agricultural Policy of 2013 on farm income and farming strategies. We focus specifically on the impact of an alternative direct payment system based on a flat rate and green payments. We show the added value of an economic simulation experiment to existing economic micro- and sector modeling analysis when analyzing farmer behavior. It is shown that the suitability of and rewards for the provision of green services play a significant role in their uptake by farmers and the support for them. These results are useful in implementing a revised direct payments system in the Netherlands for the future.     

农业产业化机制创新提高农民收入的实证分析———以坝上地区为例

文章基于"数据-行为-绩效"理论研究范式,运用坝上地区5个县602个农户的调查数据,对各种农业产业化模式的经济效益进行了比较研究,并通过建立多元线性回归模型,分析了农业产业化机制创新促进农户增收的影响因素。研究表明:与旅游业相关的3种产业化模式,从业面积纯收益与人均纯收益都明显高于传统产业化模式。回归结果显示:农户家庭特征变量中只有农户财产对农户增收有比较明显的影响;农户资源禀赋变量中各变量对农户增收均具有比较显著的影响;除了传统种养业产业化模式对农户增收的影响不够显著外,坝上地区的其它农业产业化机制创新模式,尤其是生态种养业产业化模式与生态农业与乡村旅游兼业产业化模式对增加农户家庭收入的作用确实很明显。充分说明,不断进行农业产业化模式与机制创新,使农业产业化经营与生态农业、特色农业、休闲农业相结合,可以最大程度地发挥其增加农户收入的积极作用。     

Welfare implications of reduced government subsidies to farm families: accounting for fringe benefits

In the past three decades, farm families have relied on government payments and off‐farm income to reduce income risk and increase total household income. Studies have shown that, as the income effect dominates, government payments tend to reduce off‐farm labor of farm operators and spouses. But that may not be true if one accounts for fringe benefits associated with off‐farm employment. Additionally, with looming budget deficits and the possibility of a reduction in decoupled government payments, farm families may be facing an altered economic environment. Our study addresses this issue by examining the links between government farm program payments and the ever‐important role of fringe benefits in the off‐farm employment of farm couples. Results from farm‐level data actually show that the marginal effect of government payments on hours worked off‐farm will decrease in magnitude when accounting for fringe benefits, ceteris paribus. These results support the notion that farm households’ welfare loss stemming from reduced decoupled payments may be overstated when models exclude fringe benefits from the estimation of off‐farm labor supply.     

The Distributional Impact of Direct Payments on Irish Farm Incomes

The objective of this paper is to analyse the distributional effects of the different income components of Irish farm income with a Gini comparison method and by disaggregating the overall Gini coefficient of income inequality by income source. Using individual farm data for 1992 and 1996, the impact on farm income distribution of the MacSharry CAP reform is assessed. In addition, the change in the Gini coefficient between these years is decomposed into the changes in the within‐source distribution of each income stream and the share of each income stream. The favourable movement in the Gini coefficient is found to be due to the introduction of direct payments, which target less well‐off farmers. Market income remains the single largest influence on deciding the income ranking of a farm while contributing less to total income than before.