ANALYSIS OF FINANCIAL SUBSIDIES ALLOCATED BY THE COMMON AGRICULTURAL POLICY TO EUROPEAN FARMS IN REDUCING ECONOMIC-TERRITORIAL INEQUALITIES BY INDEXES OF CONCENTRATION

Nicola GALLUZZO

Authors

Nicola GALLUZZO Association of Economic and Geographical Studies of Rural Areas, Italy, asgear@libero.it

Keywords:

Gini Index, Rural Development Plan, Farm Accountancy Data Network, Sen poverty index.

Abstract

Analysis of Financial Subsidies Allocated by the Common Agricultural Policy in European Farms in Reducing Economic-Territorial Inequalities by Indexes of Concentration. As a consequence of the European Union (EU) enlargement in 2004 there has been a reshaping of funds allocated by the EU both in favour of an endogenous rural development, part of Pillar 2 of the Common Agricultural Policy (CAP), and also in terms of direct payments towards ag-commodities financed by Pillar 1 of the CAP. The European Commission, in order to evaluate the impact, role and function of the CAP, has set up an annual survey on a sample of European farms belonging to the Farm Accountancy Data Network (FADN). By using the FADN dataset for the period 2004-2012 in 25 EU Member States, this paper has assessed by indexes of concentration whether funds allocated by Pillars 1 and 2 of the CAP have reduced economic disparities in some EU Member States. Findings have shown that there has been a drop of inequality distribution in terms of financial subsidies in European farms allocated to strengthen the rural development. Focusing the attention on financial supports to disadvantaged rural areas, territorial disparities appear quite diversified among EU Member States.

Author Biography

Nicola GALLUZZO, Association of Economic and Geographical Studies of Rural Areas, Italy, asgear@libero.it

Association of Economic and Geographical Studies of Rural Areas (ASGEAR), Via Salaria per L’Aquila 76 scala A Rieti, Italy, asgear@libero.it

References

Boulanger, P. (2010), Distribution of Agricultural Support: Selected French Evidences. OECD Workshop on the Disaggregated Impacts of CAP Reform, Paris, 10-11 March, 2010.

Camaioni, B., Esposti, R., Pagliacci, F., Sotte, F. (2013), Quanto è “rurale” la Politica di sviluppo rurale?, Agriregionieuropa, 9(34).

Ciaian, P. and Swinnen, J.F. (2006), Land market imperfections and agricultural policy impacts in the new EU member states: a partial equilibrium analysis, American Journal of Agricultural Economics, 88 (4), 799-815.

Ciaian, P., Kancs, D.A. and Swinnen, J. (2014), The impact of the 2013 reform of the common agricultural policy on land capitalization in the European Union, Applied Economic Perspectives and Policy 1, 1-31.

Crescenzi, R. and Rodríguez-Pose, A. (2011), Innovation and regional growth in the European Union, New York: Springer Science & Business Media.

Depperman, A., Grethe, H. and Offermann, F. (2013), Distributional effects of CAP liberalization on western German farm incomes: an ex-ante analysis, European Review of Agricultural Economics, 41(4), 605-626.

El Benni, N., Finger, R., Mann, S. and Lehmann, B. (2012), The distributional effects of agricultural policy reforms in Switzerland, Agricultural Economics Czech, 58, 510-519.

El Benni, N. and Finger, R. (2013), The effect of agricultural policy reforms on income inequality in Swiss agriculture - An analysis for valley, hill and mountain regions, Journal of Policy Modelling, 35 (4), 638-651.

European Commission Agriculture and Rural Development (2014), Concept of FADN. Available at www.ec.europa.eu/agriculture/rica/concept_en.cfm (accessed June 2014).

Farris, F.A. (2010), The Gini Index and Measures of Inequality, The American Mathematical Monthly, 117(10), 851-964.

Frawley, J.P. and Keeney, M. (2000), The Impact of Direct Payments on Farm Income Distribution, Project Report (Project No. 4656), Dublin.

Galluzzo, N. (2013), Farm dimension and efficiency in Italian agriculture: a quantitative approach, American Journal of Rural Development, 1 (2), 26-32.

Galluzzo, N. (2015), Role and effect of agroforestry subsides allocated by the Common Agricultural Policy in Italian farms, International Journal of Food and Agricultural Economics, 3(1), 19-31.

Keeney, M. (2000), The Distributional Impact of Direct Payments on Irish Farm Incomes, Journal of Agricultural Economics, 51, 252-265.

Knigma, D. and Oskam, A. (1987), Measuring income disparities between and within farm households and non-farm household by means of the individual welfare function of income, in Y. Leon and L. Mahe (eds.), Income disparities among farm households and agricultural policy, Kiel: Wissnschaftsverlag Vauk Kiel.

Mishra, A., El-Osta, H. and Gillespie, J.M. (2009), Effect of agricultural policy on regional income inequality among farm households, Journal of Policy Modelling, 31, 325-340.

Moreddu, C. (2011), Distribution of support and income in agriculture. OECD Food, Agriculture and Fisheries Working Paper, n. 46, OECD Publishing, Paris; on the website http://dx.doi.org/10.1787kgch21wkmbx-en.

Pyatt, G., Chen, C. and Fei, J. (1980), The distribution of income by factor components, Quarterly Journal of Economics, 95, 451-473.

Rizov, M., Pokrivcak, J. and Ciaian, P. (2013), CAP subsidies and productivity of the EU farms, Journal of Agricultural Economics, 64 (3), 537-557.

Rude, J. (2008), Production effects of the European Union's single farm payment, Canadian Journal of Agricultural Economics / Revue canadienne d’agroeconomie, 56(4), 457-471.

Schmid, E., Sinabell, F. and Hofreither, M.F. (2006), Direct payments of the CAP-distribution across farm holdings in the EU and effects on farm household incomes in Austria, Univ. für Bodenkultur Wien, Department für Wirtschafts-und Sozialwiss, Inst. für Nachhaltige Wirtschaftsentwicklung.

Sen, A. (1976), Poverty: an ordinal approach to measurement, Econometrica: Journal of the Econometric Society, 44 (2), 219-231.

Severini, S. and Tantari, A. (2014), The contribution of different off-farm income sources and the government payments to regional income inequality among farm households in Italy, Bio-based and Applied Economics, 3(2), 119-135.

Shucksmith, M., Thomson, K. and Roberts, D. (2005), The CAP and the regions: The territorial impact of the Common Agricultural Policy, Wallingford, Oxfordshire: CABI.

Swinbank, A. (2008), Potential WTO Challenges to the CAP, Canadian Journal of Agricultural Economics / Revue canadienne d'agroeconomie, 56 (4), 445-456.

Theil, H. (1967), Economics and information theory (vol. 7), Amsterdam: North-Holland.

Von Witzke, H. (1979), Prices, common agricultural price policy and personal distribution of income in West Germany agriculture, European Review of Agricultural Economics, 6 (1), 61-80.

Von Witzke, H. and Noleppa S. (2007), Agricultural and trade policy reform and inequality: the distribution effects of the direct payments to German farmers under the EU’s new common agricultural policy, Working paper no. 79/2007.

Zhu, X., and Lansink, A. O. (2010), Impact of CAP subsidies on technical efficiency of crop farms in Germany, the Netherlands and Sweden, Journal of Agricultural Economics, 61(3), 545-564.