IDEAS home Printed from https://ideas.repec.org/p/eei/rpaper/eeri_rp_2009_01.html
   My bibliography  Save this paper

Income Distribution Effects of EU Rural Development Policies: The Case of Farm Investment Support

Author

Listed:
  • Pavel Ciaian
  • Tomáš Ratinger

Abstract

This paper analyses income distribution effects of investment support granted under the EU Rural Development Policies (RDP). In the short-run and with perfect credit markets, the size of gains for farms depends on the extent to which investment additionality is enforced. If additionality is not enforced, farms gain an important share of the total support but do not have incentive to increase capital use. If additionality is enforced, gains for farms are lower and farms can even lose. With imperfect rural credit markets, farms would most likely prefer to increase capital use even without enforcement of investment additionality and total welfare increases. In the long-run farm benefits from this investment may be enhanced because of the multiplier effect. Introducing minimum thresholds as eligibility criteria may deter small farms from uptaking the investment support even if investment additionally is not enforced. Benefits from investment support are shared with capital suppliers. Gains of capital suppliers depend on the size of the capital supply elasticity and are conditional on the EU support to increase farm capital demand.

Suggested Citation

  • Pavel Ciaian & Tomáš Ratinger, 2009. "Income Distribution Effects of EU Rural Development Policies: The Case of Farm Investment Support," EERI Research Paper Series EERI_RP_2009_01, Economics and Econometrics Research Institute (EERI), Brussels.
  • Handle: RePEc:eei:rpaper:eeri_rp_2009_01
    as

    Download full text from publisher

    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2009_01.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Peter Verburg & Bas Eickhout & Hans Meijl, 2008. "A multi-scale, multi-model approach for analyzing the future dynamics of European land use," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(1), pages 57-77, March.
    2. Salhofer, K., 1996. "Efficient income redistribution for a small country using optimal combined instruments," Agricultural Economics, Blackwell, vol. 13(3), pages 191-199, February.
    3. Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2006. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 351-364.
    4. Alston, Julian M. & James, Jennifer S., 2002. "The incidence of agricultural policy," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 33, pages 1689-1749 Elsevier.
    5. Pavel Ciaian & Johan F.M. Swinnen, 2009. "Credit Market Imperfections and the Distribution of Policy Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1124-1139.
    6. Pavel Ciaian & Jan Pokryvcak, 2004. "Agricultural Reform in Slovakia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 54(9-10), pages 420-435, September.
    7. Bruce Gardner, 1981. "Efficient Redistribution in Agricultural Commodity Markets," University of Chicago - George G. Stigler Center for Study of Economy and State 20, Chicago - Center for Study of Economy and State.
    8. Curtiss, Jarmila & Latruffe, Laure & Medonos, Tomas & Ratinger, Tomas, 2007. "Investment Activity and Ownership Structure of Czech Corporate Farms," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7826, European Association of Agricultural Economists.
    9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    10. Pavel Ciaian & Johan F.M. Swinnen, 2006. "Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 799-815.
    11. Oglethorpe, David R. & Sanderson, Roy A., 1999. "An ecological-economic model for agri-environmental policy analysis," Ecological Economics, Elsevier, vol. 28(2), pages 245-266, February.
    12. Bollman, Ray D., 1999. "Human Capital and Rural Development: What Are the Linkages?," Agriculture and Rural Working Paper Series 28025, Statistics Canada.
    13. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    14. Laure Latruffe, 2005. "The Impact of Credit Market Imperfections on Farm Investment in Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 17(3), pages 349-362.
    15. Kilian, Stefan & Salhofer, Klaus, 2008. "Single Payments of the CAP: Where Do the Rents Go?," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 0(Issue 2).
    16. Schader, Christian & Sanders, Jurn & Offermann, Frank & Lampkin, Nicolas & Stolze, Matthias, 2008. "Cost-Effectiveness Evaluation of Swiss Agri-Environmental Measures on Sector Level," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6604, European Association of Agricultural Economists.
    17. John E. Floyd, 1965. "The Effects of Farm Price Supports on the Returns to Land and Labor in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 73, pages 148-148.
    18. Chantal Le Mouel, 2004. "Impacts of alternative agricultural income support schemes on multiple policy goals," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 125-148, June.
    19. Joe Dewbre & Jesús Antón & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
    20. Catherine Benjamin & Euan Phimister, 2002. "Does Capital Market Structure Affect Farm Investment? A Comparison using French and British Farm-Level Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1115-1129.
    21. Salhofer, Klaus & Schmid, Erwin, 2004. "Distributive leakages of agricultural support: some empirical evidence," Agricultural Economics, Blackwell, vol. 30(1), pages 51-62, January.
    22. Salhofer, Klaus & Schmid, Erwin, 2004. "Distributive leakages of agricultural support: some empirical evidence," Agricultural Economics, Blackwell, vol. 30(1), pages 51-62, January.
    23. Dimitris Psaltopoulos & Eudokia Balamou, 2005. "Modelling the Effects of Trade Policy Scenarios on Multifunctionality in Greek Agriculture: A Social Accounting Matrix Approach," ENARPRI Working Papers 014, ENARPRI (European Network of Agricultural and Rural Policy Research Institutes).
    24. Pavel Ciaian & Johan F.M. Swinnen, 2006. "Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 799-815.
    25. van Ittersum, Martin K. & Ewert, Frank & Heckelei, Thomas & Wery, Jacques & Alkan Olsson, Johanna & Andersen, Erling & Bezlepkina, Irina & Brouwer, Floor & Donatelli, Marcello & Flichman, Guillermo & , 2008. "Integrated assessment of agricultural systems - A component-based framework for the European Union (SEAMLESS)," Agricultural Systems, Elsevier, vol. 96(1-3), pages 150-165, March.
    26. Felici, F. & Paniccia, R. & Rocchi, Benedetto, 2008. "Economic Impact of Rural Development Plan 2007 2013 in Tuscany," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44256, European Association of Agricultural Economists.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Rural development policies; policy rents; policy modelling; farm investment.;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eei:rpaper:eeri_rp_2009_01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia van Hove). General contact details of provider: http://edirc.repec.org/data/eeriibe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.