5-State-Evaluation: Effects of farm income diversification support

Lead Institute BW Institute of Farm Economics

Involved Institutes LV Institute of Rural Studies

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Evaluation of the rural development programmes of five German federal states in the programming period 2014-2020: Effects of farm income diversification support

Agricultural holdings face permanent pressure to adjust in order to remain or gain competitiveness. In doing so, many farm managers decide to establish additional sources of income. The state supports these structural adjustments via investment support and advisory services. We investigate the opportunities and obstacles of diversification as well as the effectiveness and efficiency of the support measures.

Background and Objective

The Thünen Institute of Farm Economics and the Thünen Institute of Rural Studies evaluate the rural development programmes (RDPs) of the German states of Northrhine-Westphalia, Hessia, Schleswig-Holstein and Lower Saxony/Bremen. The main task is to assess the effectiveness of the support measures with regard to the goals set. One of the measures in Hessia is to support investments for farm income diversification aiming at increasing income, generating jobs and adding value in rural areas.

We investigate the relevance of the support measures as well as their effectiveness and efficiency.

Approach

Diversification of farm holdings is inadequately recorded in official data (e.g., Agricultural Census, Farm Accountancy Data Network) and hence primary data collection is needed. The microdata of supported and non-supported farms is supplement by expert interviews and focus groups discussions. The impact of the support measure will be identified by means of with/without and before/after comparisons of structurally similar farms.

Data and Methods

The following data sources will be used:
- official agricultural statistics (e.g., Agricultural Census, Farm Accountancy Data Network)
- primary collection of data (farm managers of diversifying farms)
- expert interviews and focus groups discussions with consultants, farmers' associations, etc.
- data from the funding agency

Preliminary Results

Initial results indicate that the diversification projects carried out with support mainly have positive effects on the supported farms and contribute to stabilising and increasing the incomes of the supported farming households. The employment effects are relatively high, although the incomplete data only allow cautious estimates. Deadweight effects limit the impact of the support measure. In principle, the (external) financing of necessary structural-technical investments is mostly not a problem.