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Direct Payments, Spatial Competition, and Farm Survival in Norway

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  • Hugo Storm
  • Klaus Mittenzwei
  • Thomas Heckelei

Abstract

We argue that farm survival is influenced by neighboring farmers’ characteristics and, in particular, by the direct payments neighboring farmers receive. The article shows empirically that these interdependencies are crucial for an assessment of the effects of direct payments on farm survival. Using spatially explicit farm-level data for nearly all Norwegian farms, a spatial probit model is estimated to explain farm survival from 1999 to 2009 controlling for spatial farm interdependence. We show that ignoring spatial interdependencies between farms leads to a substantial overestimation of the effects of direct payments on farm survival. To our knowledge, this article is the first attempt to empirically analyze the importance of neighboring interdependencies for the effects of direct payments on farm survival.

Suggested Citation

  • Hugo Storm & Klaus Mittenzwei & Thomas Heckelei, 2015. "Direct Payments, Spatial Competition, and Farm Survival in Norway," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(4), pages 1192-1205.
    • Handle: RePEc:oup:ajagec:v:97:y:2015:i:4:p:1192-1205.
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    File URL: http://hdl.handle.net/10.1093/ajae/aau085
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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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