Abstract
SummaryThe two main policy approaches to promoting structural adjustment in EU agriculture are Farmer Early Retirement Schemes and New Entrant Schemes for Farmers. The evidence suggests that the former do not represent value for money. We report the results of a farm business modelling exercise using a sample of Northern Irish farm businesses from the Farm Accountancy Data Network to compare and contrast ex ante the effectiveness of two alternative approaches to a New Entrant Scheme, a working capital installation grant and an interest subsidy on a farm development loan. The interest rate subsidy on a farm development loan appeared to provide much better value for money in that it resulted in consistently superior performance across all of the farm performance indicators used. These outcomes were achieved despite the assumption of a very modest return of 3 per cent on the investment in the farm business. We postulate that the benefits of the interest rate subsidy are associated with the potential dynamic impacts of the farm investments, linked to the long‐term effects of differences in age related lifecycle goals. The reform proposals for the post‐2013 CAP to assist the setting up of young farmers could potentially capture these farm business dynamic effects.
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