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Home arrow Economics arrow Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.

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Farm survival and growth

Understanding the determinants of farm survival or exit/closure is critical for capturing the forces of structural change in agriculture. The determinants of strategic decisions under the different policy scenarios were investigated to assess the main factors behind an intention to exit from farming, and to understand which factors were recurrent and which varied with the policy framework. This was done using a probit model with the dependent 0 or 1 response variable being the decision to stay in or exit from the farming sector within the coming five years. Farmers operating larger farms were shown to be more likely to stay in farming in all scenarios.

Growth is another important component of structural change. In the case of our study, the distribution of farmers’ plans to grow was strongly biased towards “no change” as many respondents stated they were not planning to alter the size of their farm in the coming five years, and towards “no downscaling” as very few respondents reported a plan to reduce the size of their farm. Under these circumstances, econometric analyses are only possible using a discrete variable based on the farmer’s plan to grow with two categories: intending to grow, or not intending to grow. Therefore, the determinants of growth were also analysed using a probit model that contrasted the farmers intending to grow with the rest of the respondents.

Results showed that younger farmers are more likely to grow, but that farm size seems to have no impact on growth intentions. Better performing farms were also more likely to grow under the decoupled policy. Regarding the determinants for both exit and growth, there is no clear difference between the EU15 and the NMS.

 
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