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Decoupled Payments and the Localization of Activities

  • Daniel, Karine
  • Kilkenny, Maureen

This article considers the impacts of (de)coupled farm sector support on the locations of farming and agro-industrial activity. An economic geography model is developed which has two types of regions, one with extensive agricultural production (rural), the other with intensive farming that is more densely populated (urban). The farm and agro-industrial sectors are vertically linked. A service sector that is not directly linked to either basic industry is also explicit. We show that coupled and decoupled subsidies affect the spatial distribution of farming, industry, and service sector activity. Support that is provided to all farmers regardless of crop, thus semi-decoupled, increases spatial agglomeration. Support targeted to farmers of particular crops, especially rural comparative advantage crops, favors increased farming in rural areas but spatial agglomeration of non-farm activity still occurs. This latter targeting approach is used in the European Union.

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File URL: http://purl.umn.edu/24942
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Paper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24942.

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Date of creation: 2002
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Handle: RePEc:ags:eaae02:24942
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  1. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  2. Maureen Kilkenny, 1995. "Transport Costs and Rural Development," Center for Agricultural and Rural Development (CARD) Publications 95-wp133, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  4. Federico TRIONFETTI, 1997. "Public Expenditure and Economic Geography," Annales d'Economie et de Statistique, ENSAE, issue 47, pages 101-120.
  5. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  6. Venables, Anthony J, 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
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