Family farm business and access to rural development polices: a demographic perspective

The aim of this paper is to analyze funding strategies adopted by family farms with reference to rural development plans. More precisely, it looks into the influence of demographic variables on obtaining funds from the rural development policy: we define as “consumption of policy” the farm’s ability to obtain funds from rural development policies.

In this context, any boundary between productive and reproductive work in the farm household is artificial (Errington and Gasson 1993) and conditions farms’ strategies and aptitude to invest: the number of family members and localization in the life cycle could be relevant variables of influence. In a lot of cases, demographic transition, either vertical or oblique (Bergstrom 1996), is stimulated by policies aiming at favoring intergenerational transmission. Besides, other investments are necessary to maintain a farm’s profitability and its persistence over time. In order to cope with an even more competitive scenario and to secure a family farm’s resilience, a mix of strategies has to be carried out (Darnhofer 2010).

Recent rural development polices make a set of instruments available in order to sustain farm competitiveness and to diversify agricultural income. The possibility to obtain funds is influenced by a set of constraints which, in many cases, reduce the consumption of policies. In this situation, an interesting field of analysis is the influence of demographic variables in accessing rural policies.

After presenting a brief theoretical overview, the paper proposes an empirical test within an Italian region (Lazio), where the odds of gaining access to rural development policies will be examined through a logistic regression model. The paper sustains the hypothesis of differentiation in the access to policies, due to demographic factors in the composition of family farms.

As Offutt (2002) points out, since farm households are demonstrably diverse, analysts would seem obliged to investigate hypotheses about differential response and impact. One of these differences concerns demographic variables: family contexts are particularly favorable to set up a farm venture (Jervell 2011): an abundant economic literature has emphasised the strict connection between farm household strategies and style of farming (among others, Whatmore, 1994), by demonstrating the persistency of family farms (Sabbatini 2011). Their ability to survive over time witnesses the relevance of F-connection¹ in fostering lower levels of transaction costs and a higher aptitude to adapt (Ben-Porath 1980; Pollack 1985; Corsi 2009).

Social approaches to this theme underline the relevance of non-profit decisions in maintaining farming activity (Kuehne et al2010). For example, some researchers emphasize the relevance of family identity in strengthening the links between the future and past family history (Burton, 2004). Furthermore, a sentimental attachment to the place (place dependence and place identity) reinforces the links between farmer and farming and delays the eventual decision to retire (Kuehne 2012). However, in many other cases financial constraints are determining factors, thus inducing the abandonment of activity. To avoid this, agricultural policy offers financial support to promote farm adjustments.

Some authors have recently stressed the role of the Common Agricultural Policy in preserving small farms (Koutsou et al. 2011), through the process of the functional repositioning of agriculture, as a result of deepening, broadening and regrounding, and through the creation of rural webs (van der Ploeg and Marsden 2008).

As a matter of fact, family farms are expected to play an important role even in the new scenario of “modern rurality” designed within the rural development policies (Abdelmalek, 2000). Family units are requested to face competitive challenges through the definition of farm strategies, which are generally overlapping with family strategies (Caillavet et al2005; Abdel 1997). In this context a relevant subject of analysis is related to the capabilities of gaining access to rural development policies, which contain a set of measures to sustain either farm competitiveness or diversification, along sectorial or territorial trajectories of development. This ability could be decreased both on the supply and the demand side. From the supply standpoint, a large literature taking origin from Downs (1957) work has demonstrated that deviations emerge in a context of public choice. As far as demand is concerned, collective action theories evidence the relevance of pressure groups in conditioning policy decisions (Olson 1965; Becker 1983)².

The impacts of agricultural policies on farms’ structural adjustments are analysed also within agent-based models (Balmann 1997; Albisser and Lehmann 2007; Balmann et al. 2003), which endogenise the importance of psychological and social factors which interfere in the farmer’s strategy definition. They are considered to be a useful tool to evaluate agricultural policy impact (Berger 2001; Happe 2004). More recent studies have emphasized the relevance of territory, social capital and socioeconomic farm characteristics in obtaining access to rural policies and fostering local rural development (Sabbatini, 2008; Meert et al., 2005; Marotta, 2007; Casieri et al., 2010). The inclination to adopt rural policy, that is to receive subsidies within the rural development framework, is variable and could depend on socio-demographic characteristics of the farm: family size, presence of young farmers and localization in the life cycle are influencing factors that should be examined in depth. As a matter of fact, consuming policy is a costly activity in terms of time spending and opportunity costs; in addition, informational asymmetries represent an important barrier to access. To overcome these obstacles, farmers have to improve their attention: neo-Austrian perspectives permit to get a better comprehension of the decision processes through the concept of entrepreneurial alertness (Kirzner 1973).

In the Kirznerian perspective, the entrepreneur is characterised by the aim to increase profits: to this end, he or she must pay attention to opportunities. Kirzner (1997) makes reference to the concept of alertness to summarize the entrepreneur’s aptitude to take advantage of opportunities. Access to rural development policies becomes a way to support farm adjustments.

The decision about consuming or not and about what measures are better to adopt could be influenced by demographic variables. As thoroughly demonstrated in literature, demographic variables are commonly recognized as explanatory factors influencing farm strategies: family composition and localization in the life cycle are determinants of different paths of development. What does the term demographic really mean? Should one refer to all the members of the family, or to the members effectively employed on the farm? Are there any differences if considering one or the other typology of family farms? Our paper sets in this context and aims at analysing the influence of demographic variables on the farm’s decision to adopt rural policies. By proposing a two-way classification of family farms, the hypothesis under analysis is that possible differences in the access to rural development policies could emerge. The research is conducted through interdisciplinary approaches which privilege a demographic perspective of analysis, where the fundamental elements are related to farm family traits.

To this end, after a brief methodological note our analysis proposes an empirical test of the access to rural policies, within an Italian region (Lazio). The hypothesis under study is that family composition influences the consumption of policies.

The first classification makes reference to previous publications (Bartoli and De Rosa 2007), where family composition and its localization in the life cycle are the key variables. The second one emphasizes the role of farm’s assistants³ exclusively employed within the farm or not. Due to the different perspective, the family cycle is a bit different: in the demographic typology, the young phase threshold is 35 years. Otherwise, in the second typology the age of reference is 40 years, because it is the threshold to gain access to rural development policies for generational change⁴.

Of course, this difference could raise possible dissimilarities in the total amount of young farms⁵.

I typology

– < 35 years

– 35–64 years

– > 65 years

II typology

– < 40 years

– 40–64 years

– > 65 years

The differences between the two types of family farms concern a possible different degree of involvement of family members: in the first type, family members may not be involved in the farm business and may have interests in working outside the farm; in the second case the decision process stems from people who may not share similar objectives but who are involved in farming activity; they participate and cooperate to define the farm’s strategy.

Information and data are taken from the questionnaire of the last census of Italian agriculture, at Section 1, point 7⁶. As a consequence, our analysis is necessarily partial: indeed, census data take as reference year 2010, so this covers a maximum of two/three years compared to the duration of the rural development programme (7 years).

where Y is the dichotomous dependent variable “adoption of policies” that equals 1 for farms that have gained funds and 0 for those that have not obtained any fund. The estimation function measures the success probability related to each modality of the independent variable. For each modality, the probability to get access to funds is estimated with respect to a defined modality.

The model is based on the concept that the logit is a linear function of each regressor’s parameters. In order to distinguish the two different demographic perspectives, two different models will be estimated for each type of family farms.

In what follows, we investigate the role of policies in fostering farm transformation and the eventual differences on the basis of demographic variables.

The lowest share of funded farms concerns the incentives for farm diversification (third axis): here the percentage of farms is less than 1%. In the first axis the level of adoption is very low and involves 2.4% of total farms (Table 10), while the rate of access to the measure included in the second axis is higher (3.4%).

The high costs of using European policies, in terms of bureaucracy, transaction costs, etc. could be a first motivation to explain low rates of access. On the other side, the low share of access is particularly relevant in the case of 3^rd axis, which contains new tools for sustaining quality of life and economic diversification in rural areas⁸.

Elderly families prevailingly consume measures under the second axis, which are exclusively related to environmental payments⁹. Finally, the table points out a very low percentage of farms having used measures of quality of life and diversification of rural economy (3^rd axis). However, even in this case, the second type of family farms located in younger phases display a higher percentage of access, thanks to the presence of an active assistant.

The paper aimed at showing the relevance of demographic factors in influencing the way family farms gain access to funds for rural development. The demographic perspective has been introduced through two typologies of classification of family farms. Empirical analysis has shown important insights:

– first of all, a reduced share of consumption of rural policy emerges, above all in terms of new tools foreseen within the third axis of the rural development programme;

– a second element of reflection stems from the consideration of demographic variables: family farms managed by a young entrepreneur demonstrate a higher probability to obtain funds, thanks to a longer life expectancy, which raises farmers’ alertness and his propensity to invest;

– finally, the two adopted demographic perspectives confirm the importance of the assistants, above all exclusive or prevalent, in taking investment decisions and obtaining access to rural policies to sustain farm adjustment. The lower level of access registered in the first typology of farms emphasises the relevance of the present/absent assistant farmer, recently underlined in literature on the subject (Koutsou et al. 2011).

According to the neo-Austrian perspective adopted by this paper, it is possible to sustain the hypothesis that the family farm’s alertness is significantly higher in the case of either young farms or young farms where assistants support the farmer’s activity, above all in the early stages of life cycle. However, the explanation for the ability of young farmers of obtaining funds from rural development policies cannot overlook the fact that the subjective condition of a "young farmer" is a priority in the allocation of resources for rural development. There is also a specific measure for the settlement of young farmers and an implicit resource reservation. On the other side, that means that “targetisation” works well in improving generational renewal. In this perspective, the introduction of a demographic viewpoint has given important insights, in order to fully understand the decision making mechanism to consume rural policies. The differences due to the two adopted demographic perspectives support the necessity to discriminate the supply of policy by taking these factors into account. More precisely, the discovered impact of the presence of family members working as assistants should encourage policies to foster their permanence in the farm and to avoid the search of off-farm jobs. Surely, rural development policies aimed at encouraging a farm’s boundary shift (Banks et al. 2002) are in the agenda, but they are not exploited enough, owing to a set of motivations well described in other studies on the subject. To this end, more efforts are necessary to increase the percentage of access and, through this, raise the probability of higher levels of persistency of family farms.

¹Families, friends and firms.

²See, among others, Rausser 1982; de Gorter and Swinnen 2002 Peltzman 1976.

³The assistant is a family member who helps the farmer.

⁴The average age is related to the woman, when she is present in the farm.

⁵Dissimilarities are eventually attributable to the presence of young members even within extended families.

⁶See http://www.istat.it for more details.

⁷The value is equal to 1 for farms that get access to funds and 0 for farms that do not.

⁸For the evaluation of policy consumption under Axis 3 it is necessary to precise that a part (often considerable) of the resources allocated to this axis is not devoted to farmers, but to other entities, both public and private.

⁹ See the data concerning the progress of the spending on http://www.reterurale.it.

This research was conducted with support from the Region Lazio, Department of Agriculture and Rural Development. We would like to thank Roberto Aleandri, Stefano Risa, Laura Baldini, Manuela Corleto (Region Lazio) and the anonymous reviewers for helpful comments and suggestions on an earlier version of the manuscript.