The Effect of Agricultural Policy Reforms on Income Inequality in Swiss Agriculture - An Analysis for Valley, Hill and Mountain Regions

We analyse the development of income inequality in Swiss agriculture for the period 1990-2009. To this end, Gini coefficients are estimated using FADN data. Furthermore, we estimate concentration ratios and Gini elasticities for market income, direct payments and off-farm income. Our analysis is separated for the three production regions in Swiss agriculture: valley, hill and mountain regions. This study is motivated by the fact that Swiss agricultural policy reforms resulted in dramatic changes of the importance of different income sources in the here considered period. Our results show that household income inequality increased only slightly between 1990 and 2009. Furthermore, agricultural policy reforms affected the income inequality differently in the considered production regions. More specifically, the introduction of area-based direct payments in 1992 mainly affected the valley region. In contrast, the introduction of cross-compliance and abandonment of farm household payments in 1999 had stronger effects for farmers in the hilly and mountainous region. An increase in direct payment income would decrease household income inequality, especially in the mountain and hill regions. Also off-farm income reduces income inequality while market income increases inequality.