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The relation between agricultural and non-agricultural economic development: Technical report on an empirical analysis of European regions

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  • Margarian, Anne

Abstract

Support of agriculture is justified, among others, by its contribution to rural economic development. Nevertheless, the relation between agricultural and general economic development may be ambiguous. On the one side, agriculture may affect other sectors positively via multiplier and income effects. On the other side, competition effects may arise due to the application of common factors, specifically labour, by agriculture and other sectors. Under these circumstances, support of agricultural production may create distorted market signals and thereby affect the medium and long-term economic development negatively. This research analyses the regionally differentiated relation between the agricultural and the non-agricultural development empirically. The panel estimation model applies data of the common regional accounts from NUTS3 regions of the EU27. It identifies different development regimes with different roles for agriculture. In the most developed economies, competition effects dominate. Nevertheless, in low-productivity regions of Eastern Europe, agriculture stabilises the development of employment and value added. Thereby, policy faces the challenge to support simultaneously structural change in agriculture and the development of other sectors in rural regions.

Suggested Citation

  • Margarian, Anne, 2012. "The relation between agricultural and non-agricultural economic development: Technical report on an empirical analysis of European regions," Arbeitsberichte aus der vTI-Agrarökonomie 01/2012, Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries.
  • Handle: RePEc:zbw:vtiaba:012012
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    Keywords

    Europe; regional development; structural change; sectoral development; role of agriculture; Europa; Regionalentwicklung; Strukturwandel; Sektorale Entwicklung; Rolle der Landwirtschaft;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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