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Weekly UpdatesAbstract In Croatia, farmers prepare themselves for the impending EU accession and consider their future economic opportunities in and outside agriculture. This study on farmer's strategies reviews empirical evidence of a unique household survey conducted in early 2007 in Croatia. The main objective of this paper is to present new insights on the transition dynamics in one of the EU candidate states with good prospects to accede within the coming years. Based on empirical data we present a multinomial regression model on drivers of farm household's livelihood strategies. Farm exit, farm expansion and the combination of farm and non-farm incomes are the main strategies which are tested against socio-economic variables with a potential influence on them.
Keywords Croatia * EU Accession * Agriculture
JEL Q12 * Q18
Introduction
Structural change in the farming sector is forceful in Europe's transition economies. For policy makers it is a challenging task to promote necessary adaptations and, at the same time, to avoid excessive out-migration, social exclusion, and poverty in rural areas (OECD 2006). The changes of farm structures, rural livelihoods, and labor markets often cause fear and economic stress for farmers during the adaptation phase.
In Croatia, farmers are in a process to prepare for the impending EU accession. While the negotiations on the agricultural chapter are ongoing, farmers are considering their future economic opportunities in and outside agriculture.
This study on farmer's expectations, prospects, and strategies in view of Croatia's EU accession, review recent empirical evidence; the household survey on which we base our analysis was conducted in spring of 2007. The case study includes 138 farm households from two Croatian regions: The peri-urban Zagreb county and the typically rural region of Bjelovar and Bilogora. It looks at the hitherto widely disregarded socio-economic situation of Croatia's farm sector, including employment opportunities on and off farm. Our analysis focuses on driving forces of farm household strategies. The main objective of this paper is to present new insights on the transition dynamics in one of the EU candidate states with good prospects to accede within the next years. Questions with regard to rural development policies and farmer's expectations and livelihood strategies were thus explicitly included in the survey. Based on this data we present descriptive statistics and a multinomial regression model on drivers of farm household strategies in Croatia.
Croatia's Family Farms: Where Do They Stand and What Do They Expect from the EU Accession?
Farmers in rural areas of Croatia usually have limited access to land and are in need of additional income sources (Franic 2006; Mollers and Fellmann 2007). This section examines the household structures and the economic key characteristics of Croatian farm families. We will shed light on the current starting point of the forceful structural change that is to be expected for the coming years.
Sample and Survey Design
A farm household survey was conducted in Croatia in the spring of 2007. The main objective of this empirical work was to fill existing gaps concerning socio-economic characteristics of Croatian farms. The results are not representative for the national level; however, they offer highly detailed and otherwise not available insights into Croatia's rural households.
The survey refers to two selected research areas within Croatia. The two distinct regions were chosen as to reflect different employment opportunities offered to the rural population: Zagreb county represents a region with a more peri-urban character and thus better market opportunities, particularly with regard to the non-farm labor market. Bjelovar-Bilogora was selected as a typically rural region of Croatia. The number of farm households that were included in the analysis totalled 138; we gathered information on all 565 household members.
The questionnaire that was used for this study contained several customized sections to capture farming activities, sources of income, driving forces of income diversification, attitudes towards farm and non-farm activities, policy support and plans for future farming and employment strategies.
Socio-Economic Structures and Farm Characteristics
The average family size of our rural sample households is four household members (Table 1). The dependency ratio is calculated as the relation of active and dependent family members. Persons in active age, i.e. those who are between 16 and 64 years old, account for 70% of all household members. Each person in active age supports on average 0.5 children or elderly persons.
Almost 40% of the household members went only to elementary school. The biggest share, 47%, has secondary education. Both, vocational education and higher education make up relatively small proportions of 11% and 8%, respectively. The figures in Table 1 reveal that about 15% of the surveyed households have to rely on the lowest educational level: More than two thirds of the families have at least one household member with vocational or secondary education and the proportion of households with higher education reaches 18% if the highest level of education in a household is the criterion.
The most important economic asset of a rural household is typically its farm land. Access to land is the basis for agricultural incomes and hence is most decisive in terms of income strategies of rural people. Only if the land resources are sufficient or can be expanded will a household decide to rely on farm income sources in the longer term. If the farm is considered uncompetitive, it can be expected that households seek to open up niche markets, such as medicinal herbs, or the income strategies will be directed to the non-farm sector. In the latter case, it is of utmost importance whether farms are given up and the land is made available to more competitive farms or whether structural change is slowed down because the land stays with its owners and is used for hobby or (semi-) subsistence purposes, or even falls fallow without use. Before these issues will be discussed in more detail, we will present some agricultural indicators as found in the survey regions.
Croatian farms are small compared to the European average. Even though the sample farms are bigger than the national average, the average farm size is less than seven hectares (see Table 2). About 60% of the land is arable and used for crop production, whereas 35% are pastures and meadows, the rest being land for permanent crops or glass houses. The most important crop is corn. It occupies approximately half of the arable land and is followed by other cereals, mainly wheat and barley. Smaller areas, less than 15% of all lands, are cultivated with leguminous plants, vegetables, fruits and wine. Similar to the farm sizes, the average number of livestock is small. On average, each farm keeps about three milking cows and between five and six pigs.
The biggest share of farms (49%) works on more than three to ten hectares. Less than one fifth of all interviewed farms belongs to the class size with farms bigger than 10 ha, whereas one third of the researched farms is three hectares or smaller. In terms of structural change, the socio-economic structure of farms is as important as the farm sizes. Farm types reflecting the income generating activities in a farm household are defined according to the labor input into farming and the proportion of farm incomes compared to income from non-farm employment (Henrichsmeyer and Witzke 1991). We distinguish between three types of farms: The first two types allocate the major share of the household head's labor into farming and most of the household's earned incomes are derived from the farm. Full-time farms earn a maximum of 10% from non-farm sources. The second type of farms earns 11-49% of its total income from non-farm employment (complemented part-time farms). The third type is the typical subsidiary farm, in which the household head spends most of his working time outside the farm sector or the non-farm incomes are bigger than the farm incomes (subsidiary part-time farms). As can be seen from Table 2, subsidiary part-time farms prevail with more than 60% in the sample. About one quarter of the interviewed households belong to the group of full-time farms. Farms that complement their income with non-farm incomes in the range of 10-50% are found less frequently; overall they make up about 12% of all farms.
The average household income of a typical four-person household was found to be about [euro]16,500 in the year 2006 (Table 3). The per capita income reached about [euro]4,000 which is less than 50% of the national figures as given by the World Bank (2007). This difference is explained by rural-urban disparities; it is also reflected in the two research areas, where peri-urban Zagreb is better endowed with a per-capita income of [euro]4,600 compared to [euro]3,400 in Bjelovar-Bilogora. Table 3 displays a per capita income of [euro]5,650 which is calculated on the basis of adjusted household sizes and thus takes into account economies of scale. Farm incomes contribute the biggest share to rural incomes. Non-farm incomes account for about 30% of total income; hence, farm households depend to a considerable degree on non-farm income sources.
Typical non-farm activities comprise to petty trade and services (18% of all recorded jobs in the sample). This includes for instance car repair garages, gastronomy, hair-dressers, tailors and janitors. About 9% of all jobs in the non-farm sector are in the food industry and in food processing; another 15% in other industry branches. About 20% of all employees are in administration, public services or academic professions such as teachers, doctors, lawyers etc. Furthermore the shares of those employed in the agricultural and forestry sector (workers as well as experts such as advisors), in trade, in transportation, and in the construction sector lie at between 8% and 12% each.
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