MEXSAI Conference, Cancún, 2-4 November 2004

Directorate for Food, Agriculture, and Fisheries 1

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES

Information Needs for Policy Evaluation: The Example of Income Objectives of Agricultural Policies in OECD Countries

MEXSAI Conference, Cancún, 2-4 November 2004

Catherine MoredduDirectorate for Food, Agriculture and Fisheries

Directorate for Food, Agriculture, and Fisheries2

Main messages

• Current agricultural policies support farm household income but in a very inefficient and inequitable way

• Policies are designed and implemented in the absence of adequate information on the income situation of farm households

• To implement more efficient, decoupled and targeted policies, there is a need for clearer criteria and better information


Context: OECD work on farm household income issues (1)

• Synthesis Report published in 2003: Farm Household Income: Issues and Policy Responses, OECD, Paris– Reviews the income situation of farm households

using available data, and evaluates current policies.

– Concludes that income policies are designed and implemented in the absence of adequate information.


Context: OECD work on farm household income issues (2)

• OECD/PACIOLI Workshop on income needs for analysing farm household income issues 29-30 April 2004, Paris.– Policy Brief entitled Farm Household Income: Towards

Better Informed Policies

– Proceedings to be published by LEI, The Hague at the end of 2004


What are the income objectives of agricultural policies?

• In most OECD countries, income objectives are still prominent, but almost never clearly stated or quantified

• They are expressed in terms of:– Parity with other sectors

– Disparities within the sector

– Incidence of low-income

– Variability


What indicators are needed to evaluate progress?

• Need to interpret objectives and propose indicators as measurable criteria are not set in objectives

• Timely, accurate, complete and flexible data to derive indicators of achievements

• Farm income provides only a partial view


Income composition

+ Market receipts+ Budgetary = payments+ Other receipts =

-- Cash expenses -- =

Depreciation

+ Gross wages + = and salaries+ Property income = =+ Social transfers --+ Other income Taxes and

mandatory contributions

Gross receipts Net operating

income

Farm income

Farm income

Off-farm income

Total farm household

income Disposable farm

household income


Farm households derive a significant share of their income from non-farm sources

0102030405060708090

100

Netherl

ands

German

y

Switzerl

and

France

Belgium

Poland

Greece

Austria

Hungary

Sweden

Australi

a

NorwayKorea

Denmark

Irelan

d UK

Finlan

dJa

pan

Canad

aUSA

0102030405060708090100

% share of non-farm income in total farm household income

Note. Data are not comparable across countries

Narrow definition of households

Broad definition of households


What indicators are needed to evaluate progress?

• Broad indicators of farm household income and wealth are needed

• Broad definition of farm households • Individual, flexible data• Comparable information across sectors• Timely


What information was used in the income study?

• Aggregated data for average level, composition and comparison with other households (e.g. IAHS)

• Individual farm account data for distribution study, wealth included (ARMS, FADN)

• Individual income survey data to evaluate the incidence of low income (Luxembourg Income Study)

• Time series to measure income variability • Share of support: PSE as a % of farm receipts


Income comparison

• Income of the agricultural households sector (EUROSTAT)– Aggregate picture of the total and disposable income

of farm households

– Narrow definition

– Comparable information


Structural Indicators Project

• Farm account data + household component

• Quartiles based on gross sales

• National surveys and definitions

• Definition as broad as possible


Data quality and availability

• Incomplete coverage of the sector• Incomplete and more or less detailed variables• Different definitions of farm types• Different sources of information • Problems with accessibility

Data not comparable across countries


As a result

• Country comparison is very difficult

• Data and results have to be documented

• Interpretation has to be careful

• Improvements can and should be made


Luxembourg Income Study

• Comparable data

• Access through the Internet

• Confidentiality respected but difficulty in interpreting aggregate results

• Flexible definition of farm households

• Farm households often not representative

• No structural information other than income


Results of the OECD analysis

• support raises farm household income, and• reduces revenue variability

but• It is unequally distributed (most goes to larger farmers),• has virtually no redistributive impact by farm size, • often increases income disparities, and • its efficiency in transferring income to farm households is low


Most support is linked to production levels or input use and does not take account of the income situation

• It is not targeted to low income households

• It is not equitable

• Large amounts are transferred to unintended beneficiaries (rich farmers, input suppliers, non-farming landlords, etc.)

• It has negative international spillover effects


In conclusion, if required, decoupled and targeted payments would be more efficient

To implement such payments, there is a need for clearer criteria and better information on the incidence and causes of financial problems among farm households to find the most efficient solution


The OECD suggests more effective and equitable solutions, to be applied sequentially

1. Develop market solutions for the provision of public goods and for risk management

2. Envisage payments for certain public goods, provide risk management instruments

3. Invest in general services to improve rural infrastructure and off-farm opportunities

4. Use the general tax and social security systems to address remaining income problems


Remarks on information needs

• Without accurate information on the situation in agriculture, problems cannot be identified and efficient remedies cannot be applied

• The importance of collecting precise and flexible data to be able to design, monitor and evaluate effective policies should be recognised

• Access to individual data should be improved (legal and practical problems)


What are the obstacles to obtaining and using relevant information?

• political

• administrative, and

• technical


How to obtain better information?

• Obtaining political commitment is crucial: simple and effective communication, focusing on key players

• Improving communication between government agencies

• Cost issues

– Reduce data collection costs: IT, merging of existing data sets

– Compare them with the cost of support

– Attach data collection costs to specific measures

• Exchanging best practices and working together on international standards


How would such information help policy makers?

• To assess the extent of income problems• To define measurable targets• To design programmes • To evaluate policies• To improve current programmes• To assess the impact of a reform• To compare alternative options• To communicate accurate and clear information


Continuous OECD efforts in this area

• Disseminate policy-relevant information and analysis

• Provide a forum for countries to exchange experiences

• Participate in other networks active in the field

MEXSAI Conference, Cancún, 2-4 November 2004

Documents