Farmer income and decoupled direct payments in North Macedonia

FAO

Farmer income and decoupled direct payments in North Macedonia

Year of publication 2023

Place of publication Rome, Italy ;

Pages 2p.

Author FAO

Publisher FAO ;

Product type Policy brief

Series title FAO Agricultural Development Economics Policy Brief

Series number No. 64

Full item page

Synopsis (short abstract) This policy brief summarizes the key findings and policy recommendations of the corresponding working paper “Decoupling direct payments in North Macedonia: impacts on farmer income”. North Macedonia’s ambition to join the European Union requires reforms of the agricultural sector and subsidy system. One major reform is the alignment to the rules of the Common Agricultural Policy (CAP) of the European Union on direct payments, including the “decoupling” of direct payments from production quantities. The decoupling of direct payments is likely to have significant impacts on production decisions, prices and therefore on farmer income. This paper identifies four possible scenarios for North Macedonia to align the direct payment scheme to the regulations of the European Union and subsequently analyses the impact of each scenario on farmers' income, using an ex ante analysis method in the form of a static microsimulation approach and the farm accountancy data network (FADN) data at individual farm level. The results show that, on average, farmer income increases when direct payments are decoupled in North Macedonia. We further test for heterogeneity and identify different effects along farm types and economic farm size – and find that some farmers would exhibit income losses as a result of the reform (i.e. specialist cattle, mixed crops and livestock farmers).

The findings in this brief have been adapted from the FAO Agricultural Development Economics Working Paper 23-03 Decoupling direct payments in North Macedonia – Impacts on farmer income.

Cite this content as:

FAO. 2023. Farmer income and decoupled direct payments in North Macedonia. FAO Agricultural Development Economics Policy Brief, No. 64. Rome.

https://doi.org/10.4060/cc5128en

Language English

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North Macedonia’s ambition to join the European Union requires reforms of the agricultural sector and subsidy system. One major reform is the alignment to the rules of the Common Agricultural Policy (CAP) of the European Union on direct payments, including the “decoupling” of direct payments from production quantities. The decoupling of direct payments is likely to have significant impacts on production decisions, prices and therefore on farmer income. This paper identifies four possible scenarios for North Macedonia to align the direct payment scheme to the regulations of the European Union and subsequently analyses the impact of each scenario on farmer income, using an ex ante analysis method in the form of a static microsimulation approach and the farm accountancy data network (FADN) data at individual farm level. The results show that, on average, farmer income increases when direct payments are decoupled in North Macedonia. We further test for heterogeneity and identify different effects along farm types and economic farm size – and find that some farmers would exhibit income losses as a result of the reform (i.e. specialist cattle, mixed crops and livestock farmers). The document was developed as a key deliverable in the context of TCP/MCD/3703 “Strengthening of Agriculture and Rural Development Policy Analysis and Programming”.
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