Is non-farm income diversification a feasible option for small-scale farmers? An assessment using a composite fuzzy indicator

Abstract

European politicians encourage the income diversification of rural households through various measures. Although a knowledge of farm households’ potential for non-farm income diversification seems important for finely targeting such policy measures, thus far no attempt has been made to summarise the various determinants of income diversification in a single figure. This contribution aims to close this gap. A composite fuzzy indicator that measures farm households’ potential for non-farm income diversification is developed and applied to 626 small-scale farm households in Bulgaria, Hungary, Poland, Romania and Slovenia. The indicator summarises the incentives and capacities for non-farm income diversification on the individual household member level and on the household and regional levels in a single measure using fuzzy logic methodology. The composite fuzzy indicator performs well and the results for the single small-scale farm households can easily be retraced. The indicator not only singles out the households that have the potential for non-farm income diversification but also shows the reasons for this. The indicator shows that most of the 626 households studied have a high potential for non-farm income diversification and that all are pushed toward diversification by the small size of their farms. The composite fuzzy indicator also identifies farm households that are trapped in a desperate situation due to unfavourable chances of finding a job in the labour market and long distances to the nearest large urban centre. Decision makers could utilise the composite fuzzy indicator to finely target diversification measures to the multifaceted conditions of farm households.

Acknowledgement

The author gratefully acknowledges the financial support of the European Community under the Sixth Framework Programme for Research, Technological Development and Demonstration Activities for the Specific Targeted Research Project ‘SCARLED’ SSPE-CT-2006-044201 (www.SCARLED.eu). The views expressed in this article are solely those of the author and do not necessarily reflect the views of the European Commission.

Notes

1. The primary sector refers to agriculture, hunting and forestry.

2. ‘The total annual working time of the persons employed in agriculture is converted into “annual work units” (AWU). One AWU is taken to be the minimum number of hours per year laid down in the national collective agreements. If the number of hours is not laid down in these agreements … the AWU is based on 1800 working hours per year’ (Eurostat 2010b).

3. People aged 20 – 64 years are at an economically active age.

4. ‘The nomenclature of territorial units for statistics, abbreviated as NUTS … is a geographical nomenclature subdividing the territory of the European Union into regions at three different levels (NUTS 1, 2 and 3, respectively, moving from larger to smaller territorial units). Above NUTS 1 is the “national” level of the Member State. NUTS areas aim to provide a single and coherent territorial breakdown for the compilation of EU regional statistics. The current version of NUTS (2006) subdivides the territory of the European Union and its 27 Member States into 97 NUTS 1 regions, 271 NUTS 2 regions and 1303 NUTS 3 regions’ (Eurostat 2010c).