Subsidies and the income inequality in the Hungarian wine sector
- Income inequality; Off-farm income; Market income; Subsidies; Wine farms; Gini decomposition
How to Cite
Copyright (c) 2023 Imre Ferto, Stefan Bojnec
This work is licensed under a Creative Commons Attribution 4.0 International License.
Nemzeti Kutatási Fejlesztési és Innovációs Hivatal
Grant numbers 128855
Javna Agencija za Raziskovalno Dejavnost RS
Grant numbers N5-0094
The paper investigates the impact of different sources of income on wine farm income inequality in Hungary using Farm Accountancy Data Network data for the period 2013-2019. Decomposition of the Gini coefficient is applied to focus on the impact of the Common Agricultural Policy (CAP) shift from market to government budgetary support on wine farm income inequality. Off-farm income has a rather stable impact on wine farm income inequality. CAP Pillar 1 subsidies have remained more important than CAP Pillar 2 subsidies both in the structure of wine farm income and in the reduction of wine farm income inequality. The most striking finding is regarding a shift in wine farm market income from a negative (losses) to a positive (profit) value and its increasing role in wine farm income inequalities. The 20% of the largest wine farms created from almost 90% to less than 80% of total wine farm incomes between 2013 and 2019, but during the same period, their participation in CAP subsidy payments was reduced much more from more than 80% to around 60%. Subsidies from Pillars 1 and 2 were reduced, while wine market income and to a lesser extent off-farm income increased wine farm income inequality. The wine farm market income has driven wine farm income inequalities. This might strengthen because of the ongoing market selection process with the exit of less efficient and loss-making wine farms and the increasing role of surviving profitable wine farms. This market selection process can be related to managerial, entrepreneurial, and innovation activities based on differentiation and segmentation of wine farm products and their market incomes.
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