Diversification in Italian farm systems: Are farmers using interlinked strategies?

This paper analyses interlinkages between farm household diversification strategies in rural Italy. The paper contributes to the literature by providing a quantitative analysis of farm household decisions while explicitly taking into account the potential interaction in the choice of diversification strategies. We use data from the 2006 Italian Farm Accountancy Data Network. Diversification is explained based on internal and external characteristics. External determinants include the distance to urban population centers, landscape features and social capital in the local community. Internal determinants include farm size, specialization, tenancy restrictions, labor use and business structure. We apply a multivariate probit model to determine the factors that affect diversification decisions so as to assess the correlation between farmers’ strategies. The results highlight the importance of social capital and networks in developing diversification in Italian rural areas. Furthermore, we find the presence of both synergies and trade-offs in different types of diversification. These results should be taken into account more explicitly when tailoring rural development measure