The Effect of Eco-Scheme Support on Romanian Farms-A Gini Index Decomposition by Income Source at Farm Level

The Common Agricultural Policy 2021-2027 includes stronger environmental and climate targets to contribute to Green Deal objectives. By using direct payment funds for sustainable agricultural practices, the CAP aims to strengthen incomes, reduce climate impact, protect biodiversity, etc. However, there are many conditions farmers must meet to access funds under eco-schemes, and there are many concerns about their impact on income and profitability. It is, therefore, important to understand the impact of subsidies on Romanian farms. This study analyses income inequality on three Romanian farms (with a cultivated area between 2400 and 2600 ha, 550 and 610 ha, and 40 and 66 ha during the 2019-2021 period), focusing on the impact of different income sources (production and subsidies). The study is based on data collected during the 2019-2021 period and uses Gini coefficients and concentration indicators. The results show the following: the inequality-reducing effect of subsidies depends on crop rotation and changes in income from agricultural production; the influence of subsidies on inequality at the farm level is very low; the dependence on direct payments can be overcome by good crop selection and management; farmers cannot survive without subsidies, especially in years with difficult conditions; the impact of subsidies was higher for the lowest-profit variants. These findings are important because eco-schemes are voluntary, and stakeholders are not expected to spend the money allocated to eco-schemes.

Automated summary

The Common Agricultural Policy 2021-2027 aims to strengthen environmental and climate targets by supporting sustainable agricultural practices. Although farmers can access funds under eco-schemes, there are concerns about the impact on income and profitability. This study analyzes income inequality on Romanian farms and the influence of subsidies on different income sources.