OECD Policy Brief: October 2004 Farm Household Income: Towards Better Informed Policies

1. OECD Policy Brief: October 2004Farm Household Income: Towards Better Informed Policies Concern: income levels, variability, disparities, equity. Objective of many agricultural policies: improving the income situation of farm households. Problem is TARGETING those who need it: Difficult to assess impact/appropriateness of policies due to lack of appropriate data and measurement- Traditionally: partial indicators of household wellbeing (i.e farm produce) Needed: more comprehensive concept of farm household income (social transfers, property income included) WHY? Increasingly farm households derive a significant share of income from off-farm sources.

2. Need to focus on questions asked • Do farm households achieve income levels on a par with the rest of the economy? • Is the incidence of low Y higher in the agricultural sector? • How large are income inequalities within the sector? • Is income variability higher? • Is a specific solution appropriate or can they be solved by tax & social security policies? Need to know the impact their policies are having on farm Y, composition, distribution & variability. What is needed to answer these questions: • Need as wide a definition as possible of the farm household including : wealth, indicators of wellbeing (health), investments, social transfers, property. • Panel data to understand variability of receipts • Structure and behavior of farm households • Spreading of accurate info on income situation of farm households and communication of results of analyses on the impact of policies on income levels, distribution and variability.

3. Problems with existing measurement: • Most systems incomplete and out of date. • Lack of consistency (micro/macro, farm surveys, farm/general surveys) • Income ‘typology’ based solely on commodity production-relevance! • ‘Off farm’ income (if included) is often unreported • Lack of comparability of agricultural data with non agricultural. • Need to reflect contemporary conditions • No. of households included too small Sources: EU FADN (Farm Accounting Data Network)-information on farm income, cost & returns from farm operations US ARMS (Agricultural resource management study) Tax Files Household expenditure surveys Total income of farm households help with informing policy makers of income status of the sector and the effectiveness and efficiency of social, fiscal & agricultural policies therefore need more detailed, comparable information on the farm household..

4. Obstacles to obtaining desired info: • Administrative (communication, costs, legal/confidentiality, burden) • Technical (representation, usefulness, stability, data collection) • Political (legitimacy) How to overcome obstacles? Are policies achieving their desired objectives? New perspective needed in addition to growing accountability demands, budget constraints & improvements in data collection. • Reduce costs of collecting & transmitting data by using ; existing admin, Non- Agri data, telephone interviews, internet questionnaires. • Improve communication on income issues & hence understanding • International standards and consistency

5. How such information will help policy makers • Share of income from agriculture in total income of farm households key element in understanding income situation of farm households from this policy makers can: • Define policy objectives • Design new programmes suited to specific problems • Evaluate current policies with regard to their income objectives • Assess nature, cause and extent of problems • Improve current programmes • Assess impact of reform on farm households well-being • Compare alternative options Remaining issue: simply collecting data is not enough as most support is still given on the basis of production levels-largest, richest farms receive the most income support –needs to affect policy decisions.

6. What can be done to improve farm household well-being • Monitor deficiencies in data • Improve data and consequently the process of designing and monitoring policies . • Evaluate both domestic and international policy-evolving policies and statistical systems need to adjust. • Planning and implementation of improvements –LT process • Realization that costs of collecting appropriate data are minor compared to the costs of policies to improve the income of farmers and this data would better enable them to. • Overcome technical problems with resources • Co-operation between statisticians, analysts, policy makers & countries) • International harmonization of systems and definitions. • National governments need to act.