Application of spatial econometric approach in the evaluation of rural development policy: the case of measure Modernisation of agricultural holdings

The paper analyses targeting and spatial impacts of investment support on agricultural holdings in Slovenia within the national Rural Development Plan for the period 2007-2013. The measure Modernisation of agricultural holdings primarily tackles the problem of low labour productivity in Slovenian agriculture. Achievement of the stated objective of productivity enhancement in agriculture is monitored by the relevant Common Monitoring and Evaluation Framework indicator, standard output (i.e. approximated revenue) per annual work unit SO/AWU. Municipalities (LAU2) are the territorial units of the analysis. Non-spatial and spatial econometric models are developed in order to determine to what extent the estimated labour productivity is affected by intensity of investment support and other factors (measure-specific variables, agricultural structures, socio-economic conditions and geographical conditions). Effectiveness of spatial targeting has been analysed by testing the assumption of a positive relationship between the intensity of implementation of the analysed measure and the productivity. The presence of spatial effects (spatial autocorrelation and spatial heterogeneity) has been examined by including the spatial weight matrix to the ordinary least squares regression. The results confirm a positive relationship between farm investment support and agricultural labour productivity and spatial spillovers in agricultural labour productivity