Farm household income inequality in Slovenia

Štefan Bojnec,Imre Fertő

doi:10.5424/sjar/2019174-13996

Abstract

Aim of study: To investigate the structure and evolution of farm household income and examine the contribution of different sources of farm household income, particularly the impact of Common Agricultural Policy reform on farm household income inequality in Slovenia.Area of study: Slovenia, one of the European Union member states.Material and methods: A panel data set was compiled using Slovenian Farm Accountancy Data Network data at farm level for the period 2007-2013. Total farm household income was disaggregated into two different components: 1) income components, which can contain market income and off-farm income, and 2) subsidy components, which can contain subsidies from Pillars 1 and 2. Pillar 2 support included subsidies related to agri-environmental measures, less favoured areas and other rural development measures. The income distribution and decomposition were examined using the Gini decomposition method to determine the contribution of each income source and the policy shift from market to government support on farm household income and overall inequality.Main results: A shift in Common Agricultural Policy and related measures determined the structure and evolution of farm household incomes. Off-farm income had a lesser and rather stable impact on farm household income inequality, while the major change involved an increase in the importance of subsidies from Pillar 2 which is consistent with a policy of targeting farms in less favoured areas. Subsidies from Pillar 1 reduced, while market income increased farm household income inequality.Research highlights: Subsidies in farm incomes increased. They could reduce farm household income inequality.

Highlights

The traditional objective of the Common AgriculturalPolicy (CAP) of the European Union (EU) has been to increase agricultural income and to ensure an adequate level of farm income
These policy shifts and the growing pressure to reallocate EU budget funds to larger societal and global issues have increased attention on the potentially distortive and perverse effects of Common AgriculturalPolicy (CAP) subsidies as they account for 37% of the EU budget (European Union, 2019)
While market income underwent a similar process of evolution over time, subsidies from Pillar 2 compensated for subsidies from Pillar 1 as an important income source for non-LFA farms in Slovenia

Summary

Material and methods

A panel data set was compiled using Slovenian Farm Accountancy Data Network data at farm level for the period 2007-2013. The income distribution and decomposition were examined using the Gini decomposition method to determine the contribution of each income source and the policy shift from market to government support on farm household income and overall inequality. Main results: A shift in Common Agricultural Policy and related measures determined the structure and evolution of farm household incomes. Off-farm income had a lesser and rather stable impact on farm household income inequality, while the major change involved an increase in the importance of subsidies from Pillar 2 which is consistent with a policy of targeting farms in less favoured areas. Subsidies from Pillar 1 reduced, while market income increased farm household income inequality. Research highlights: Subsidies in farm incomes increased They could reduce farm household income inequality. Additional keywords: farm income; off-farm income; Common Agricultural Policy; less favoured areas; Gini decomposition.

Introduction

Methods and data

Findings

Discussion