Determinants of regional disparities in farm income: markets or policy?

In this paper, the focus is on regional disparities in agricultural income, particularly in the context of agricultural price fluctuations and the impact of agricultural policy. In a first step, a theoretical model explaining regional disparities in farming revenues is presented. The following chapter contains an illustration of the development of agricultural prices as well as farming income with and without support. Additionally, we give an overview of regional disparities with regard to the instability of farm revenues, considering the issue of the stabilization effects of the cap. Analysis of the instability of farm revenues with and without support due to the adoption of different policies has revealed that there are remarkable differences among several of the policy scenarios. In order to get some information on causalities, we investigate regional disparities in farm revenues and analyse the differences for crop and animal production. The results of this analysis indicate substantial disparities between farms located in geographically different types of regions. That is to say, farms located in favoured agricultural regions obviously generate higher revenues than farms located in regions having to operate in poor conditions. Furthermore, investigation into recent regional changes in farm revenues finds that farms with a more balanced farming strategy generate the highest increase in farm revenues.