FARM HOUSEHOLD INCOMES AND REFORMING THE CAP

of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. 2 Low and variable farm income has been a main rationale for heavy government intervention in agricultural markets and income transfers to farmers whether in Europe in response to disruptive agricultural imports and low world prices at the end of the 19th century or in the US in response to the Great Depression. While the future of the Common Agricultural Policy (CAP) is again discussed and new directions are examined, it is fundamental to know to what extent low and variable farm income is still a problem in contemporary European agriculture and a valid rationale for designing the new CAP. In this context, this paper first examines the income level and distribution of farm households compared to those of non-farm households for a selection of OECD countries. Second, the paper econometrically investigates whether explanations for low farm income given in the literature apply to the selected OECD countries for the 1980-2000 period. Third, the pape