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Disinvestment, Farm Size, and Gradual Farm Exit: The Impact of Subsidy Decoupling in a European Context

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  • Andrius Kazukauskas
  • Carol Newman
  • Daragh Clancy
  • Johannes Sauer

Abstract

The recent reform of the Common Agricultural Policy, which decouples farm subsidies from production, is expected to impact on farmers' production decisions. We perform a cross-country farm-level empirical analysis of farmers' production responses to these reforms using a panel dataset for the EU15 countries for the period 2001--2007. We apply quasi-experimental empirical methods and find that the probability of a farm disinvesting decreased due to the policy change for most farms. However, the policy change facilitated exit for farms engaged in livestock production and those that were already in the process of leaving the sector. Copyright 2013, Oxford University Press.

Suggested Citation

  • Andrius Kazukauskas & Carol Newman & Daragh Clancy & Johannes Sauer, 2013. "Disinvestment, Farm Size, and Gradual Farm Exit: The Impact of Subsidy Decoupling in a European Context," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(5), pages 1068-1087.
  • Handle: RePEc:oup:ajagec:v:95:y:2013:i:5:p:1068-1087
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    Cited by:

    1. Edward Knapp & Jason Loughrey, 2017. "The single farm payment and income risk in Irish farms 2005–2013," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-15, December.
    2. Ani L. Katchova & Mary Clare Ahearn, 2017. "Farm entry and exit from US agriculture," Agricultural Finance Review, Emerald Group Publishing, vol. 77(1), pages 50-63, May.
    3. Sarah Ann Wheeler & Ying Xu & Alec Zuo, 2020. "Modelling the climate, water and socio-economic drivers of farmer exit in the Murray-Darling Basin," Climatic Change, Springer, vol. 158(3), pages 551-574, February.
    4. Zheng, Yanan & Goddard, Ellen W. & Qiu, Feng, 2018. "Exploring the Effect of Disease Outbreaks on Farm Structure Change: A Dynamic Analysis for Canadian Pig Industry," 2018 Annual Meeting, August 5-7, Washington, D.C. 273801, Agricultural and Applied Economics Association.
    5. Nicola GALLUZZO, 2019. "An Assessment Of Rurality In Italian Farms And In Their Specialization Using A Quantitative Approach," Agricultural Economics and Rural Development, Institute of Agricultural Economics, vol. 16(1), pages 39-51.
    6. Cathal O'Donoghue & Thia Hennessy, 2014. "Chapter 03: The Agri-Food Sector," Chapters from Rural Economic Development in Ireland, in: Rural Economic Development in Ireland, edition 1, chapter 3, Rural Economy and Development Programme,Teagasc.
    7. Andrius Kazukauskas & Carol Newman & Johannes Sauer, 2014. "The impact of decoupled subsidies on productivity in agriculture: a cross-country analysis using microdata," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 327-336, May.
    8. Alexander Zorn & Franziska Zimmert, 2022. "Structural change in the dairy sector: exit from farming and farm type change," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 10(1), pages 1-31, December.
    9. Jean Joseph Minviel & Timo Sipiläinen, 2021. "A dynamic stochastic frontier approach with persistent and transient inefficiency and unobserved heterogeneity," Agricultural Economics, International Association of Agricultural Economists, vol. 52(4), pages 575-589, July.
    10. Sebastian Neuenfeldt & Alexander Gocht & Thomas Heckelei & Klaus Mittenzwei & Pavel Ciaian, 2021. "Using Aggregated Farm Location Information to Predict Regional Structural Change of Farm Specialisation, Size and Exit/Entry in Norway Agriculture," Agriculture, MDPI, vol. 11(7), pages 1-22, July.
    11. Wagener, Andreas & Zenker, Juliane, 2018. "Decoupled but not neutral: The effects of stochastic transfers on investment and incomes in rural Thailand," TVSEP Working Papers wp-008, Leibniz Universitaet Hannover, Institute of Development and Agricultural Economics, Project TVSEP.
    12. Magali Aubert & Geoffroy Enjolras, 2014. "Le mode de commercialisation est-il une échappatoire pour les exploitations en difficulté financière ?," Post-Print hal-02740150, HAL.
    13. Voica, Daniel C., 2014. "Are Subsidies Decoupled from Production in the Presence of Incomplete Financial Markets?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169788, Agricultural and Applied Economics Association.
    14. Taisuke Takayama & Tomoaki Nakatani & Tetsuji Senda & Takeshi Fujie, 2021. "Less‐favoured‐area payments, farmland abandonment and farm size: evidence from hilly and mountainous areas in Japan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 658-678, July.
    15. Magali Aubert & Geoffroy Enjolras, 2015. "Are short food supply chains a solution for farms facing financial difficulties?," Post-Print hal-02800273, HAL.
    16. Biagia De Devitiis & Ornella Wanda Maietta, 2015. "Shadow Prices of Human Capital in Agriculture. Evidence from European FADN Regions," CSEF Working Papers 415, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    17. Bruno Morando & Carol Newman, 2021. "Capital Misallocation, Agricultural Subsidies and Productivity: A European Perspective," Trinity Economics Papers tep0221, Trinity College Dublin, Department of Economics.
    18. Marasteanu, Ioana Julia & Minor, Travis, 2017. "Foodborne Outbreaks And Farm Structure: An Examination Of Vegetable And Melon Farming," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 5(4), October.
    19. Theodoros Skevas & Wyatt Thompson & Scott Brown & Victor E. Cabrera, 2021. "Milk Income over Feed Cost Margin, Margin Protection Program, and Farm Finances for a Sample of Wisconsin Dairies in 2000–2017," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1638-1657, December.
    20. Grüner, Hans Peter & Muller, Daniel, 2016. "Measuring political information rents: Evidence from the European agricultural reform," European Journal of Political Economy, Elsevier, vol. 43(C), pages 107-126.
    21. Andreas Wagener & Juliane Zenker, 2021. "Decoupled but Not Neutral: The Effects of Counter‐Cyclical Cash Transfers on Investment and Incomes in Rural Thailand†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1637-1660, October.
    22. Simola, A., 2018. "Choice of product mix and agricultural subsidies - evidence from a quasi-experiment in Agenda 2000 CAP reform," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277534, International Association of Agricultural Economists.
    23. Kehinde Oluseyi Olagunju & Myles Patton & Siyi Feng, 2020. "Estimating the Impact of Decoupled Payments on Farm Production in Northern Ireland: An Instrumental Variable Fixed Effect Approach," Sustainability, MDPI, vol. 12(8), pages 1-17, April.
    24. Emmanuel Paroissien & Laure Latruffe & Laurent Piet, 2021. "Early exit from business, performance and neighbours’ influence: a study of farmers in France," Post-Print hal-03373465, HAL.
    25. Denis Nadolnyak & Valentina Hartarska & Bretford Griffin, 2019. "The Impacts of Economic, Demographic, and Weather Factors on the Exit of Beginning Farmers in the United States," Sustainability, MDPI, vol. 11(16), pages 1-17, August.

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