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2000-11-01
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Frawley, J.P., Keeney, M., The Impact of Direct Payments on Farm Income Distribution, End of Project Reports, Teagasc, 2000.
Abstract
The switch in emphasis from market support systems in the 1992 CAP reform toward
direct payments resulted in a dramatic increase in financial support terms, from £336.7
million in 1991 to £915.3 million in 1999 (current prices). The impact of this change in
Irish agricultural policy was to increase substantially the dependency of farmers, with
the exception of dairy farmers, on the ‘cheque in the post’ for a farm income. It is the
impact of these changes on the distribution of farm income which is of concern in this
study.
In line with these policy changes the proportion of average family farm income derived
from the market (as opposed to direct payments) decreased from 73.3 per cent in 1993
to 37.1 per cent in 1997. At the same time the corresponding proportions for direct
payments increased from 26.7 per cent to 62.9 per cent.
Analysis of the distribution of family farm income by deciles (based on FFI) and for all
farms indicates a more equitable distribution of income between 1993 and 1997. This
improvement in equity is attributed to the effects of direct payments on farm incomes.
Analysis decomposing the individual effects of selected measures show that (i)
the suckler cow premia, and (ii) the headage payments (Livestock headage
payments in the Disadvantaged Areas) were the most effective measures in
favouring income distribution equity. Cross compliance schemes (REPS and
extensification) and the special beef premia had a more moderate effect in terms
of equity while the arable aid payments contributed least to farm income equity.
The market-derived income component had a high negative effect on equity of
farm income distribution. The inclusion of a high proportion of dairy farmers
among those with high farm incomes is a likely factor in this respect.