Testing for Structural Changes in the European Union’s Agricultural Sector

Vítor João Pereira Domingues Martinho

doi:10.3390/agriculture9050092

Vítor João Pereira Domingues Martinho

Open Access

https://doi.org/10.3390/agriculture9050092

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Abstract

Over recent decades several European and global occurrences have had an impact on the European Union’s economic sectors, and subsequently on farms. In fact, the various Common Agricultural Policy (CAP) reforms, namely those since 1992, and the global financial and economic crises, specifically after 2008, seem to have had several effects on the dynamics of the entire European Union agricultural sector and on the performance of farms. However, there is doubt as to whether these events were enough to promote structural breaks in European Union farms. In this way, the main objective of this study is to analyse both the known and unknown structural breaks in European farms, between 1989 and 2016. To this purpose, data from the Farm Accountancy Data Network (FADN) from the twelve former member-states (the countries with the longer time series) and methodologies based on the Chow test and on the Quandt likelihood ratio (QLR) were considered. The results show that the structural breaks are different across the several twelve former European Union countries and among the several variables considered. In any case, the financial and economic crises, as well as changes in the European Union’s methodologies relative to statistical information, seem to have had a greater impact on the European farms than the several CAP reforms (with the exception of the reform of 1992 the trade liberalization). However, the several consequences of all these European and world events on European farms seem to be delayed for some years.

Highlights

This investigation aims to answer the following question: are the different Common Agricultural Policy (CAP) (CommonAgricultural Policy) reforms, the world financial crisis and other European (German reunification) and international events relevant to promoting structural breaks within the European Union agricultural sector?In a relatively highly regulated sector and with a great diversity of contexts or realities, such as European Union agriculture, it is normal to expect frequent changes in the instruments derived from agricultural policies
To allow for structural breaks, a dummy variable was found considering the results obtained in the previous section and the Chow test after several annual simulations
The Farm Accountancy Data Network (FADN) presents two different time series, due to changes in the statistical methodology adopted, which brings about difficulties when attempting to use a longer and up to date series

Summary

Introduction

This investigation aims to answer the following question: are the different CAP (CommonAgricultural Policy) reforms, the world financial crisis and other European (German reunification) and international events relevant to promoting structural breaks within the European Union agricultural sector?In a relatively highly regulated sector and with a great diversity of contexts or realities, such as European Union agriculture, it is normal to expect frequent changes in the instruments derived from agricultural policies. The Common Agricultural Policy has suffered several changes over recent decades, as a consequence of many factors, such as the natural evolution of the farms and the successive Parallel to this evolution of the European agricultural policies, other world events occurred, such as the world financial and economic crisis, that eventually, impacted upon the dynamics and the performance of the farming sector in the European Union member-states. The European (German reunification) and international events had consequences on the farms’ structures, and so it is important to assess their dimensions This could be important to better understand the behaviour of farms in reaction to different impacts, as insights for the several stakeholders, namely for the policymakers

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