How direct payments and their reform have affected farm income inequality in Italy?

Farm direct payments (DPs) have been the main instrument of the Common Agricultural Policy (CAP) to support farm income in the EU. After the decoupling of DPs from production levels, the distributional objectives are among the major justifications of DPs. This paper addresses their role in the distribution of farm inc come among farmers. The analysis accounts direct payments granted in the context of the market and income supp port policies and of rural development policies. Using the Gini coefficient and its d disaggregation, this study investigates the impact of b both kinds of payments on farm income inequality among a large sample of farms in Italy. The analysis is developed a at a national level but also considering the three main regions of Italy and three types of farming. DPs are very concentrated but reduce fa arm income inequality. Therefore, their reduction should result in an increase of farm income concentration particularly y in some of the considered types of farming. Results suggest that the CAP reform has decreased the role DPs have played in reducing farm income inequality. This is not just because of a change in their relative importance, but especially because of changes in the patterns of their distribution