The efficiency of a threshold approach based on farm size to exclude farmers from the benefit of direct payments

The paper discusses the efficiency of a threshold approach based on farm size to exclude farmers from the benefit of direct payments, as per the Reg. (EU) 1307/13. We use farm-level census data to compare the outcome of the threshold approach with a classification of strategic profiles that identifies agricultural firms with a “non-negligible” farming activities. The empirical analysis concludes that the choice of the efficient threshold depends on the relative weights that are given to two conflicting objectives: the concentration of financial resources on one hand and the support to productive small farmers. In particular the 1-hectare threshold (art. 10 of the abovementioned regulation) is efficient only if the two weights are approximately equal. A spatial analysis suggested that lower threshold should applied in mountain areas or compensation should considered for small farmers using associations or local markets to market their productions