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Content archived on 2024-06-18

Comparative Analysis of Factor Markets for Agriculture across the Member States

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New insight into rural development

A better understanding of factor markets could help support rural development and agriculture in a growing Europe, particularly in light of new agricultural policy reforms.

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Factor markets, or markets for goods and services used in the production of final consumer products, are pivotal for European competitiveness. These markets are at the same time influenced by changes in agriculture and the rural economy. for example as a result of globalisation, technological change, shifting consumer preferences, policy changes or European market integration. Against this backdrop, the EU-funded project 'Comparative analysis of factor markets for agriculture across the Member States' (FACTOR MARKETS) analysed the operation of factor markets for agriculture in Europe. It looked at the impact of these markets on agricultural development and on rural economics, focusing on capital, labour and land markets in particular. With respect to the capital market, the project analysed various forms of capital, looking at sectoral investment decisions, as well as the impact of investments on technological change and capital stocks. It also looked at different instruments of the EU's Common Agricultural Policy (CAP) and their bearing on factor markets. From the perspective of labour markets, the project analysed human capital mobility in the agricultural sector in addition to off-farm labour supply. The third key analysis looked at the land market, studying both the renting and selling of property, as well as the impact of the capitalisation of support on land values and factors determining land transfers. Overall, FACTOR MARKETS represented the first study on rural factor markets in the continent, cross-comparing the markets of different nations and outlining differences. It enhanced understanding of key factors affecting EU agriculture, opening the door to improved targeting of CAP measures and boosting competitiveness. The project conducted in-depth analyses of key issues determining the functioning and impact of each factor market for agriculture and rural economies. Numerous valuable results have emerged from these analyses, such as identifying the drivers of capital productivity in EU agriculture and understanding the determinants of shadow prices of capital of individual farms. In addition, the project team developed a framework to analyse labour markets to better understand the supply of labour in Europe's rural areas. Importantly, FACTOR MARKETS also analysed how improved access to capital supports agricultural production and helps reduce the pressure on land use. Another important analysis involved understanding the investment behaviour of arable crop farms in selected EU countries and assessing the impact of policy reforms. These results can support rural area development across and beyond the EU, especially in light of the new CAP reforms.

Keywords

Factor market, Common Agricultural Policy, agriculture, rural development, labour market, land value, farm, policy reform

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