Journal of Agricultural Economics - Volume 50, Number 2 - May 1999 -Pages 304-315

Importance and Need for Rural Development Instruments Under the CAP: A Survey of Farmers' Attitudes in Marginal Areas of Greece

Efthalia Dimara and Dirnitris Skuras

he present work assesses the attitudes towards importance and need for providing agn'cultural development instruments other than traditional grant aid mechanisms in rural T areas. Assistance in marketing farm produce, provision of extension services on new

agn'cultural technology, agricultural training and provision of quality standards are four of the instruments examined. The importance and need fw providing these instruments depends upon producers ' human capital accumulation and farm characteristics. The analysis indicates that d#erent instruments may appb to dijjferent parts of the rural population and thus a fixible, multi- instrument and selective rural develqbment policy may be required.

1. Introduction

Significant discussions and debates have been carried out recently concerning the role of agricultural policy in developing the rural economy. The Community's agricultural strategy paper (Commission of the European Communities, 1995) and then the Cork declaration in 1996 recognised the need for a better integration between market policies, rural development and environmental policies. It is argued that agriculture, despite its decreasing importance, will continue to influence important aspects of the rural socioeconomic fabric, and agricultural policy reforms will give rise to continuing - and in many cases countervailing - adjustment pressures throughout the agrefood sector (European Parliament, 1996; OECD, 1996), while appropriate instruments to help farmers to adapt to new challenges are neglected.

The aforementioned discussions have been taken into account by a recent report proposing a new scheme for a common agricultural and rural policy for Europe (Commission of the European Communities, 1997). The main objective of such a policy is to ensure an economically efficient and environmentally sustainable agriculture and to stimulate the integrated development of the Union's rural areas. This policy, starting from the present CAP, is based on four main elements; first, a market stabilisation H The authors are assistant professors, Department of Economics, University of Patras. This work arises out of a programme of collaborative research funded by the EU AIR3 programme (CT94 1545). This article has benefited si nificantly from comments by two anonymous referees and Bruce Traill, coeditor of this Joumak

Importance and Need for Rural Develupwnt Instruments Under the CAP 305

mechanism providing a safety net for commodities subject to uncontrollable market fluctuations; second, agriculturally-related environmental and cultural landscape support to protect against damage and depletion of rural resources and cultural landscapes in rural areas and to encourage development of these resources and the social fabric; third, a range of rural development incentives concerned with all aspects of rural development, including agricultural development, but with the emphasis placed on stimulating opportunities for non-agricultural uses for farm resources and opportunities for resources released from agriculture; fourth, transitional adjustment assistance, designed to facilitate the transition from an agricultural to a rural policy (Commission of the European Communities, 1997).

The third element - rural development incentives - will build more directly upon existing structural measures and will be available both for agricultural development and for wider rural development without distinguishing between these two components. Thus, rural development policy will be an instructive signal in itself for farmers to see that they draw on exactly the same programme as non-farming interests in rural regions (Commission of the European Communities, 1997). The domination of structural policy by the commodity support programmes led to the situation where the more enterprising farmers, who had the necessary resources, capitalised on the opportunities provided by the Common Market Organisations (CMOS). This process led to a polarised socio- economic farming structure with some farmers being economically efficient and internationally competitive while others remained excluded or were marginalised. Thus, the agricultural development component of the proposed common agricultural and rural development policy has a dual objective; to consolidate the economic status of the former group and address the problems of the latter group. Given the distinct territorial and spatial nature of agricultural and rural development processes, large areas of the EU are at the margins of development. The purpose of agricultural development instruments in these marginal areas is to help producers develop their farming and non- farming activities in a way that is consistent with the regional and local objectives for rural development.

So far, agricultural development approaches under the CAP have been associated with the use of traditional instruments of grant aid and financial assistance aiming at the better management of farm resources in mainstream agricultural production. However, farmers in marginal areas are unable to attain international competitiveness in mainstream agricultural production and thus efforts along this development pathway are destined to fail. Options in these areas include: encouraging farmers to re-orient agriculture to the concepts of quality produce and the production of local denominations; assisting farmers to adopt value added activities such as on farm processing of the farm’s produce and marketing the farm’s produce by door-tc-door sales, sales to open markets, pick your own products, etc., and helping farmers to use the farm’s resources for non-farm activities, of which, the most widespread is agri-tourism in its many forms. Currently, the EU provides a legal framework for such activities to flourish. Quality production and the production of local denominations has been institutionalised by Commission Regulations No. 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, and Regulation No. 2082/92 on guaranteed traditional speciality, while a list

306 Efthalia Dimara and Dimihis Skurcls

has been drawn containing more than 380 names as protected geographical indications (PGIs) or protected designations of origin (PDOs) (Regulations No. 1107/96 and No. 1263/96). Organic agriculture is promoted through Regulations No. 2092/91 and No. 2078/92, and value added activities may be pursued through various schemes at the local, regional or national level.

An issue of central importance is how to set instruments that will stimulate farmers to make use of these various policy provisions and prepare them to adjust to the changing circumstances. Providing the correct set of agricultural development instruments ensures that the agricultural part of an initial local rural development plan (bottom-up) in marginal areas will meet the actions available within the overall EU framework ( t o p down). This paper examines farmers’ attitudes towards the importance and availability of certain non grant-aid agricultural development instruments in the island areas of Greece and assesses the need to provide these instruments to certain categories of the agricultural population.

In this work four main instruments are considered; assistance in marketing the farm’s produce by using alternative marketing techniques that increase the farm’s gross margin; provision of extension services especially in the use of modern agricultural technology (machinery, methods of production and use of improved inputs) for the production of traditional products; formal agricultural training to complete extension activities; dissemination of information concerning quality standards (PGIs, PDOs, organic products, hygiene information, etc.) , and the provision of guidelines and assistance to meet such standards. Farmers were asked to rate the importance and availability of these instruments. The difference between rankings of importance and availability points to the need for providing these agricultural development instruments as part of an integrated rural development strategy in’ these areas.

2. Survey and Model Surveys of farmers’ attitudes towards rural development instruments offer a possible way of obtaining useful information on future developments in policy provision. Most social scientists view what is called attitude, as a complex, multidimensional concept (Stevens, 1977). Attitudes embody positive or negative feelings about the object in question, beliefs or ideas about it and a tendency to behave in a particular way towards it. Attitude and intention surveys have a long history in agricultural economics, complementing economic theory, which does not always provide a wholly convincing account of farmers’ actions (Gasson, 1973; Thomson and Tansey, 1982). Attitude surveys in agriculture lead to a more adequate explanation and prediction of farmers’ economic behaviour and have been used on conservation and environmentally related issues focusing on the influence of attitude variables as predictors of behaviour (Newby et aZ., 19’7’7; Gasson and Potter, 1988; Lynne et aZ., 1988; Cary and Wilkinson, 1997), on rural and alternative agricultural strategy development (Halliday, 1989), on agricultural trade (Kastens and Goodwin, 1994) and on supply policy instruments (Bradbury et aZ., 1990). In Greece, attitudinal surveys have been used mainly to examine farmers’ and fishermen’s views on conservation issues (Fanariotu and Skuras, 1989; Pyrovetsi and Daoutopoulos, 1989, 1991; Daoutopoulos and Pyrovetsi, 1990).

Impartance and Need far Rural Development Instruments Under the CAP 307

Since the country’s accession to the European Union in 1980, Greece gradually made use of EU regional and rural development policies (Skuras, 1998). Following the 1989 reforms, the whole country was classified under objective 1 (development of lagging regions) (Commission of the European Communities, 1989). In order to examine the importance and need for various agricultural development instruments that contribute to rural development in certain economically fragile island regions, a survey of farm enterprises was conducted in two island areas of Greece. Islands from the Ionian and Aegean seas have been selected to reflect the diversity of conditions found in the country’s island and coastal areas which suffer from depopulation and are the primary target areas of rural development policies.

The islands of Cephalonia and Zakynthos in the Ionian Sea and the islands of Andros and Naxos in the Aegean Sea comprise the study regions of this work. In these islands, the demographic trends show an ageing population as a result of both outmigration of the younger and more dynamic parts of the population and return of older and less economically active or retired population. Unemployment among the young is very high, with female unemployment being significantly higher than male unemployment. Almost 50 per cent of the economically active population is engaged in some form of agricultural activity but 70 per cent of all farmers spent less than 50 per cent of their worktime on farm. The primary sector accounts for almost 18 per cent of the regional gross product in these areas. Employment in the manufacturing sector is very low, ranging from 4.9 per cent of total employment in the island of Cephalonia to 9.2 per cent in Andros and Naxos, while the national mean is around 15 per cent.

The objective of the survey was to collect information at the level of individual farms, concerning the importance of providing certain agricultural development instruments. Due to the absence of any meaningful sampling frame we decided to sample farms that have benefited from grant aid instruments and have their established contacts with institutions and organisations in rural Greece. Farms that have benefited from farm modernisation schemes account for almost 10 per cent of all farms in Greece but for more than 50 per cent of the total number of ‘primarily agricultural’ rural households,l the figure being higher in island areas were the number of ‘primarily agricultural’ rural households is significantly lower. We believe agricultural development instruments should be directed to thosemarginalised farmers that still earn most of their income from agriculture, while other farm and rural households should be the subject of wider rural development incentives. Thus, sampling from a list of farms that have benefited from farm modernisation schemes yields a fairly representative sample for our purposes.

An exhaustive list of farms that were granted community aid for structural improvement during 1990-1994 was constructed. The complete list of beneficiaries was sufficiently large for all study regions and thus a random sample of farm households was drawn. Every household in the sample received a letter in the mail by which the head of thp household was informed of the nature, the objectives and significance of the study and was requested to agree and co-operate in the survey. After conducting a pilot survey, certain minor adjustments were made to the questionnaire and personal interviews conducted by trained personnel started in the second half of August 1995 and ended in Primarily agricultural rural households gain more than 50 per cent of their income from agriculture and spent

more than 50 per cent of their time on agricultural activities.

308 Efthalia Dimara and Dimibis Skuras

mid September of the same year. The survey yielded 115 usable questionnaires of the 150 originally planned in all study regions. The non-response rate of 23 per cent was due to wrong addresses or missed respondents while only four farmers refused to participate.

Farmers were presented with four agricultural development instruments as discussed in section 1. These four instruments are not consistently and widely available in marginal rural and islands areas of Greece. Currently, there are not any marketing schemes directed to the individual small quality producer. A few efforts to provide marketing assistance to the individual small quality producer in mainland Greece under the assistance of Regional Operational Programmes or the LEADER Initiative remain sporadic. The extension service of the Greek Ministry of Agriculture does not fulfil its regulatory role, a fact that has been attributed to extreme bureaucracy and the development of ‘extra-institutional networks’ including clientelist, interpersonal and private economic networks surrounding the agency (Papadopoulos, 1997). The absence of extension services is coupled by the evident absence of any demonstration projects and/or innovative pilot programmes. Subsidised training programmes have been abundantly provided to rural areas, especially under assistance from the Social Fund. However, training was conceived as a means to increase conventional agricultural production and was largely Airected to young (under 40) farmers. In the survey, the proposed training courses were open to farmers of all ages. They were not subsidised in order to ensure that training is demanded per se, and not used as a transfer of income mechanism. Finally, the Greek State has submitted many applications to the Commission services and was successful in recognising a range of products under PGI and PDO quality labels. At the same time, farmers are not aware of the exact standards and details concerning the processes for quality production while others take advantage of loose monitoring and controls and violate quality standards.

Farmers’ attitudes towards the proposed agricultural development instruments were assessed by asking each respondent to rate the subjective importance of the four instruments on an itemised rating scale from 0 (non-important) to 2 (highly important). A 3 points scale was preferred to similar 5 or 7 points scales because, despite information loss, it does not confuse the respondent and captures his/her position on the attitude scale in a simple, but very valid way. Most attitudinal surveys in agriculture end at this point of attitude measurement (Kastens and Goodwin, 1994). Here, we proceed further by measuring, on a similar scale, the subjective perception of availability of these four instruments to the individual farmer. Thus, the need for providing a specific policy instrument to the individual farmer can be deduced from subtracting the availability rating from the importance rating. This difference can range from -2 (non-important minus highly available) to 2 (highly important minus non-available). Thus, a new scale can be constructed reflecting the.need for the provision of a certain instrument. The scale takes the value of 0 (no need) for all negative and zero observations; the value of 1 (moderate need) for all observations for which the subtraction between the importance and availability ratings result in a difference of 1; and the value of 2 (high need) when importance less availability equals 2. One drawback of this scale is that it values a difference of 1 resulting from a 2 rank in importance and a rank of 1 in availability the same as a value of 1 resulting from the difference of corresponding rankings of 1 and 0. However, we may consider this as being a minor point. Table 1 presents the frequencies

Importance and Need for Rural Development Instruments Under the CAP 309

Table 1 Frequencies of the Importance, Availability and Need for the Four Rural Development Instruments Low Modcrate Hiah

Importance Marketing 22 24 69 Extension 11 23 81

Standards 40 22 53 Training 57 25 33

Marketing 72 23 20

Training 85 21 9

Marketing 25 36 54

Training 32 49 34

Availability

Extension 51 16 48

Standards 63 20 32 Need

Extension 33 47 35

Standards 53 34 28

of the various ratings for importance, availability and need for the four agricultural development instruments.

3. DataAndysis The proposed instruments may be considered as aiming to reduce the risk of adopting certain agricultural strategies in these areas of the country by providing to the farmer skills, information and knowledge. Thus, farmers’ perceptions of importance and need may be related to various risk related variables collected from the survey. Given the limited nature of the dependent variable, an ordered multinomial model is used (Maddala, 1983). Of the more than 100 plausible variables collected, five of them were found to be significant in the importance and need models. Three of these variables are primarily related to the producer’s risk attitudes namely, the producer’s age, education and farm experience. Age is related to the receptiveness of a farmer and younger farmers are more likely to adopt riskier farm development strategies and need higher support (Damianos and Skuras, 1996a). Experience in farming is an important human capital factor that may have positive and negative impacts on the farmer’s need for support instruments. Experience reduces risk if the contemplated development strategy is a simple extension of past farming practices, as in the case where plain agricultural produce is converted to quality or organic produce. However, if the alternative strategy under consideration is completely new to the farmer, past farm experience will not have any positive impact on risk reduction, as in the case where a farmer decides to process or market his produce alone. Years in formal education are a factor critical to decisions related to farm strategies, as education enhances the farmers’ ability to search for alternatives and support measures (Keating, 1989; Cawley et aL, 1995). The number of dependent children (less than 16 years old), indicating the position of the household in the family life cycle, was also a significant variable. The number of livestock units, indicating the size of livestock holdings was found to be a Significant explanatory

31 0 Efthalia Dimara and Dimitris Skurcrr

Table 4 Variable- Nanu Definition Mean 9d. D m

AGE Farmer’s Age in Years 43.96 12.74 CHILD Number of Children Less Than 16 Years Old 0.97 1.25 W S T O C K Number of Livestock Units 13.77 24.12

Variable Definitions and Summary Statistics

EXPERIENCE Years of Farm Mangement Experience 15.61 12.21 EDUC Dummy Variable With Value of 1 if 0=75 0.48

Farmer Has More Than Primary Education 1 =40

variable. Many Greek dairy products have acquired a quality certification and it is assumed that livestock households will appreciate provision of instruments related to dissemination of information on quality standards, marketing of dairy products and training in hygiene methods for livestock production. The definition of the variables, their means and standard deviations are presented in Table 2. It is worth noting that a range of economic variables including debt to assets ratio, government payments, gross margins, family farm and non-farm income, payments to hired labour, the farm household’s off-farm annual work units, farm size, and farm type were not significant in any of the models. Two possible explanations are a low variance for many of the variables, indicating a homogenous sample, and reporting errors for variables such as debts, total assets, labour payments, and gross margins. It is also important to note that a dummy variable reflecting the different location of the farm enterprises in the Ionian or the Aegean Sea was not found to be statistically significant in any of the models examined.

The variables measuring farmer’s age and experience in farm management are usually expected to be highly correlated and thus are often not simultaneously included in a model (Goodwin and Schroeder, 1994; Damianos and Skuras, 1996b). In our case, the two variables are not correlated. Experience in farm management is related to the age of succession which, in Greece, varies among regions and farm types. It has been observed that, in recent years, farmers take over the farm’s responsibility earlier than in older periods, and are given the chance to farm part of the household’s land on their own (Skuras, 1990).

The ordered multinomial logit model is estimated eight times on the sample of the 115 farmers, and for their importance and need rankings of the four policy instruments (Table 3). Each model has a significant likelihood ratio test statistic (model chi-square), indicating that a significant proportion of the variation in responses is explained by the explanatory variables, and the parameters are jointly significant. McFadden’s R2 has values of 0.06 to 0.15, indicating a satisfactory fit (McFadden, 1979). The marginal effects of the regressors on the probabilities, which are not equal to the coefficients, are presented in Table 4 for Y=2 (the highly important-high need category). Education, the only dummy variable, is analysed by comparing the probabilities that result when the variable takes its two different values with those that occur with the other variables held at their sample means (Greene, 1991).

Marketing Assistance

Each additional year of farm experience reduces the probability of valuing assistance in marketing as highly important by 2.8 per cent, and decreases the probability that the

Importance and Need fbr Rural Development Inshzlnents Under the CAP 31 1

Table 3 Ordered Loeit Remession Results Variablc Name Importcmce Need

Marketing Exlmrion Training Standads Marketing Extmion Training Stnndardr

Constant 1.219 ( 1.258)

AGE 0.058 (2.190)

CHILD -0.040 (-0.256)

LIVESTOCK 0.0431 (2.075)

EXPERIENCE -0.121 (-3.983)

EDUC -1.560 (-3.008)

)1 1.313 (5.134)

Log Likelihood

Chi-square 33.391

McFadden R* 0.153

Model -92.542

2.412 (2.045) -0.026

0.293 (1.426)

0.044 (1.708)

0.273 (1.154)

-0.075 (-0.132)

1.492 (4.464)

54.947

12.550

(-1.040)

-1.147 (-1.304)

0.041 (2.074)

-0.022 (-0.156)

0.026 (1.627)

-0.044 (-2.076)

-0.634 (-1.522)

1.01 9 (5.427)

.112.516

13.68

1.106 (1.141)

-0.017

0.318 (1.790)

0.053 (2.797)

-0.012 (-0.518)

-0.995 (-2.160)

0.942 (4.899)

(-0.775)

106.789

25.79

1.705 (1.920)

-0.018 (0.830)

-0.100 (-0.721)

0.040 (2.033)

-0.068 (-2.804)

-1.017 (-2.404)

1.625 (6.366)

-1 09.286

22.99

-0.594 (-0.666)

0.055 (2.726)

0.372 (2.506)

-0.010 (0.905)

-0.059 (-2.863)

-1.068 (-2.410)

1.975 (7.807)

.115.467

18.89

-0.504 (-0.587)

0.038 (1.806)

0.084 (0.522)

0.043 (2.460)

-0.031

-0.645

2.024 (8.029)

115.293 17.75

(-1.379)

(-1.409)

0.652 (0.727)

-0.003 (4.134)

0.028 (0.185)

0.033 (2.114) -0.041

(-1.831)

-0.528

1.441 (6.411)

(-1.168)

-113.760

16.57

0.070 0.057 0.108 0.095 0.075 0.071 0.068

Note: Figures in parentheses are t-values.

Table 4 Change in Probab;l;ty of “Highly Important” and “High Need” Response Caused by a Margiual chanp;e in Explanatory Variable

Vanablc Name Importance Need Marketing Extnm’on Training Standards Marketing Extension Training Slandards

AGE 0.013 0.008 0.01 1 0.008

CHILD 0.079 0.075

LIVESTOCK 0.010 0.008 0.013 0.010 0.009 0.006

EXPERIENCE -0.028 -0.009 -0.017 -0.012 -0.007

EDUC change -0.070 -0.003 -0.003 0.031 0.011

Note: The table includes values only where the corresponding t-value reported in Table 3 is statistically significant. Precise statistical significance cannot be attributed given the sample size and the nriable selection procedures adopted.

same instrument is highly needed by 1.7 per cent. It has been argued elsewhere that the earlier the take-over of the farm, the more the farmer’s involvement with market mechanisms (Beus and Dunlap, 1990). Thus, the result coincides with the intuition that producers with a long history in farming are more involved with networks of market integration and so nonexperienced, young or middle-aged farmers need this instrument more. On the other hand, education reduces the probability of valuing assistance in marketing as highly important by 7 per cent but increases the prabability that the same instrument is highly needed by 3 per cent. This is an apparently contradictory result. Assistance in marketing is less highly valued by educated farmers because these

312 Efthalia Dimura and DimitTis Skuras

producers depend on their own skills and creativity in finding and designing marketing systems (Conway, 1986) and are able to use sophisticated management techniques (Anosike and Coughenour, 1990), but they have also realised a low availability of this instrument, resulting in increased need for its provision.

Extension

The perception that extension services are highly needed is positively related to farmers’ age and number of dependent children. Age is related to the receptiveness of a farmer and has been used in recent adoption and diffusion studies to explain whether or not a producer has heard about or used an agricultural technology (Shakya and Flinn, 1985; Lin, 1991; Green and Ng’ong’ola, 1993; Nkonya et aL, 1997). Moreover, having members of the family that still depend on the farmer may induce a farmer to adopt more risky farm management patterns for high returns in the short run, a strategy which is more dependent on extension services. As expected, each additional year of experience reduces the probability that this instrument is highly needed by almost 1.2 per cent. Education increases the same probability by more than 3 per cent.

Training

The probability that provision of agricultural training is valued as highly important increases by almost 1 per cent for each additional year in the farmer’s age. The same probability decreases by almost 1 per cent for each additional year of experience in farm management. The probability that this instrument is highly needed increases by almost 1 per cent for each additional year of age aqd by almost 10 per cent for every 10 additional livestock units. Older farmers consider themselves to be in need of training in new agricultural techniques, while livestock farmers are in need of formal training concerning methods for monitoring the hygienic condition of animals and dairy products.

Provision of In formation on Quality Standards

The probability that provision of quality standards is highly needed increases by 6 per cent for every 10 additional livestock units. This behaviour is easily explained by the fact that PDO and PGI products have been recently introduced for milk products and thus standards and uniform processes for their production are not widely known, as yet. On the other hand, many cheese making factories and meat packaging industries have applied quality controls following intensive veterinary and hygienic controls from the Greek Ministry of Agriculture. This pressure for products of higher quality has been passed down to milk producers that demand from the state dissemination of information concerning standards and production processes for quality products.

4. Conclusions Conventional, high-productivity and low-cost agricultural practices do not constitute a viable agricultural development strategy for marginal areas, especially in the light of

Intportanw and Need f i Rurat Deve2opment fnstmments Under the CAP 313

increased international competition. One of the objectives of a common agricultural and rural policy is to sustain agriculture by engaging farmers in alternative and unconventional agricultural activities. The EU now offers the legal framework for such activities to take place and spread in these areas, but farmers seem to be reluctant to adopt such practices. This work examined the importance of and need for offering agricultural development instruments aiming to reduce the risk of adopting alternative and unconventional agricultural practices.

It was found that the majority of farmers in four islands of the Ionian and Aegean Seas in Greece, valued assistance in marketing, provision of extension services and information concerning quality standards as very important instruments, while one third of them valued provision of formal agricultural training as very important. An analysis concerning the need to provide such instruments, taking into account their availability, revealed that the instruments are needed by different farmers depending on their various socio-economic characteristics. Less experienced and less educated farmers need assistance in marketing, farmers keeping more livestock need formal training and information on quality standards while older farmers reveal a need for the provision of extension services and formal training.

These results are only indicative and should not be accepted uncritically, nor generalised to hold true for other marginal areas of Greece or the EU. However, our results offer valuable indications of the nature of future agricultural development instruments within an integrated local agricultural and rural development strategy. First, policy instruments that assist risk reduction in adopting modern, farm household survival strategies in marginal rural areas are valued as highly important. Second, different instruments are needed by different farmers in the sample, a fact indicating the need to consider selection mechanisms in the policy delivery process.

Agricultural and wider rural development instruments can only be dealt with at local and regional level. These instruments should be territorially defined embracing both ‘people development’ and ‘place development’ (Commins and Keane, 1994). The institutional aspect was not directly raised in this work but there is evidence that central institutions have neither the resource to administer such instruments nor the local knowledge and expertise needed to understand the precise types of assistance required in each area. In the most remote rural and island areas of Greece, the task of creating or enforcing the local institutional framework represents a large political and administrative investment. Thus, one important and interesting issue for future research would be to examine the mechanisms for creating the local institutional apparatus and elaborate the initial rural development plan, including agricultural development instruments.

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