FACTORS AND POLICIES TO FAVOUR
DIVERSIFICATION OF RURAL ECONOMY:
OECD EXPERIENCE
Catherine Moreddu
Trade and Agriculture Directorate
Policies to Enhance Agricultural Innovation and
Productivity: Focus on China – Workshop
Beijing, 24 October 2013
Context of OECD work
• Primary agriculture has a decreasing role in most rural economies
in terms of population, employment and GDP
• As an important land user, agriculture provides rural land-based
amenities
• High diversity among rural regions
• Farm households contribute to the rural economy
• and diversify income sources in response to policy and societal
changes
• They thus need a healthy and diversified rural economy, which
provides off-farm work opportunities as well as services
• Is diversification of activities acknowledged, encouraged or
discouraged?
2
What diversification activities?
FACTORS OF PRODUCTION
LAND
ONFARM
L
O
C
A
T
I
O
N
OFFFARM
LABOUR
CAPITAL
Within agriculture ,
including specialty
crops, organic and
biomass production
1
Agriculture-related,
e.g. direct sales and
contracting (fencing,
crop harvesting, etc.)
Agriculture-related,
e.g. processing of
farm products
including cheese,
wine, olive oil
Other,
e.g. forestry, windturbine, recreation,
and aquaculture
Other,
e.g. handicraft, farm
tourism, contracting
(snow clearing, etc.),
Other,
e.g. biomass energy
generation, wood
processing
Agriculture,
e.g. land rented to
other farmers for
agricultural
production
Agriculture-related,
e.g. employment on
another farm
Agriculture,
e.g. purchase of
additional farmland
Other,
e.g. land rented to
others for forestry,
wind turbine
Other,
e.g. school teacher,
nurse, government
official
Other,
e.g. investment
income, pensions
3
The share of farms with other activities
varies across the European Union
% of all farms
30
25
20
15
10
5
0
Source: EUROSTAT Farm Structure Survey (FSS) 2007.
4
Most frequent activities in EU countries
are close to the farm
% share in farms with other gainful activities
EU
average
Minimum
Maximum
Processing of farm products
60
2
95 (CYP, RO)
Contractual work
15
3
73 (BUL)
Farm tourism
9
0
44 (UK)
Renewable energy production
3
0
53 (LUX)
Wood processing
2
0
23 (EST)
Handicraft
1
0
12 (DNK)
Aquaculture
1
0
10 (POL)
Other (fur farming, horses)
21
0
79 (LAT,
NLD, SLK)
Activity
Source: EUROSTAT FSS, 2007.
5
Farm tourism important in some countries
% of all farms
12
10
8
6
4
2
0
Source: EUROSTAT FSS, 2007.
6
Farm income is not the main source of
farm household income
Broad definition of farm
households
Narrow definition of farm
households
farm
off-farm labour
farm
off-farm labour
property
transfers
property
transfers
other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
7
Factors explaining diversification
• Human capital characteristics
• Nature of farm and farm business
• External environment
8
Human capital characteristics
• Business skills, education
• Financial motivations: increase and stabilise
income, social benefits of salaried work
• Other motivations: dual careers, overcoming
isolation, integration in social network, social
acceptance of pluriactivity, role of women
9
Nature of farm and farm business
• Farm size: small farms more likely but not exclusively,
also linked to farm type
• Farm type: depending on labour intensity (dairy),
seasonality (crops), interest for tourism (wine)
• Structure of ownership: family or non family labour, new
generation more likely to continue previous career and
become pluriactive, transmission strategy
10
External environment
• Distance: from food and labour markets
• Geography: landscape important for tourism,
remoteness not necessarily a handicap, but lack of
infrastructure may be, climate (snow) and nature
(forest)
• Accessibility: can be improved with infrastructure
(transport, internet, etc.)
• Organisational development: networks and
organisations facilitating coordination of efforts,
marketing of regional products/image, etc.
• Consumer demand: for farm products and tourism
11
Impact of agricultural policy on
diversification
Impact on
labour
availability
Impact on
touristic
attractiveness
Impact on
availability of
“produits
fermiers “
Impact on
income
need
Coupled income
support
--
?
+
--
Decoupled income
support
0
?
0
--
Disadvantaged
areas
--
+
+
--
Agri-environment
--
+
+
0
Rural development
+
+
+
0
Diversification
advisory
0
+
+
0
Type of measure
12
Access to government assistance
• Eligibility restricted to full-time farms
• Different support schemes for part-time farmers
• Mainly for investment support
13
Impact of land and labour regulations,
tax or social security systems
• It depends if agriculture is treated differently (more
favourably) than other activities, e.g.:
– Less constraints on land use, building construction
– Lower tax rate
• If yes, it depends if diversification activities are
considered as agriculture
– Are diversification activities allowed on farm land?
– Do agricultural labour laws and taxation and social security
systems apply to diversification activities?
• And if farmers loose agricultural status benefits if they
diversify their activities outside agriculture too much
14
Policy implications of diversification
• In some countries, there may be obstacles to
diversification. They may:
– reflect differences in objectives
– ensure farmers and non-farmers compete on equal
grounds
• When designing diversification policy:
– Obstacles must be taken into account
– Non-intended obstacles should be removed
• Developing business skills is important
• Some factors will remain outside the policy area
15
Concluding remarks
• Rural areas are diverse and the role of agriculture and farm
households is changing
• Lack of general evidence on many aspects
• Developments in rural areas are influenced by agricultural
and rural policies, but also by regulations and general
economic policies
• Farm households would benefit from a move from
agricultural to rural policies: more services and employment
opportunities
• Clear signals and policy coherence are important
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For more information
• Visit our website: www.oecd.org/agriculture
http://www.oecd.org/document/9/0,3343,en_2649_
33773_43142793_1_1_1_37401,00.html
• Contact us: [email protected]
[email protected]
• Follow us on Twitter: @OECDagriculture
Trade and Agriculture Directorate
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