Improving Agricultural Income Policies: Data and Evaluation Methods

1. Information Needs for Policy Evaluation:The Example ofIncome Objectives of Agricultural Policies in OECD Countries Catherine Moreddu Directorate for Food, Agriculture and Fisheries MEXSAI Conference, Cancún, 2-4 November 2004

2. 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

3. 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.

4. 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

5. 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

6. 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

7. Income composition

8. Farm households derive a significant share of their income from non-farm sources % share of non-farm income in total farm household income Broad definition of households Narrow definition of households Note. Data are not comparable across countries

9. 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

10. 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

11. Income comparison • Income of the agricultural households sector (EUROSTAT) • Aggregate picture of the total and disposable income of farm households • Narrow definition • Comparable information

12. Structural Indicators Project • Farm account data + household component • Quartiles based on gross sales • National surveys and definitions • Definition as broad as possible

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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)

21. What are the obstacles to obtaining and using relevant information? • political • administrative, and • technical

22. 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

23. 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

24. 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