Policy implications

Bearing in mind that the inefficiency of the labour market is an important factor behind the lack of competitiveness of rural areas in Europe, the key message from the research summarised here is that locational characteristics, skills mismatch and insufficient information appear to be the most important impediments to inter-sectoral and spatial mobility of labour.

The movement into retirement appears to be an important outflow of labour from the farm workforce. Structural change in agriculture that increases land consolidation and sees agriculture’s share of the workforce decline is likely to be highly dependent on the way land is passed from one generation to the next and, importantly, upon how the next generation decides to employ that land. The efficient functioning of land market institutions will likely affect the decisions the next generation makes at this key juncture. If land transfer is costly, then their initial decision to engage or not in agriculture may be constrained. Retirement policies, and associated conditions for pensions and further CAP entitlement access, may also influence the decisions of the next generation at this point.

Since labour markets are central to the determination of the allocation of labour, the efficient functioning of the rural labour market is extremely important for the income and development of people residing in rural areas. Rural regions in Europe are characterised by heterogeneous conditions due to socio-economic and geo-political differences. Some rural areas, especially those which are more remote, depopulated and dependent on agriculture, are the ones more at risk, as they face particular challenges in terms of growth, jobs and sustainability (European Commission, 2006).

Despite some large disparities in the economic conditions across individual member states, rural areas in general show a lower degree of economic development than urban areas.

As shown by the empirical analysis, education and training are important determinants of inter-sectoral mobility. Nonetheless, the levels of education, skills and training of farm workers are particularly low.

Therefore, rural development policies must focus on the promotion of extensive programmes to support education and vocational training and to invest in human capital in rural areas. Expenditure on education should be targeted towards upgrading managerial and employability skills, with the

168|TOCCO,DAVIDOVA &BAILEY

purpose of improving factor mobility and a more efficient allocation of labour. This might improve labour productivity in, and incomes from, agriculture and other rural non-farm enterprises by shifting those people who are currently under-employed into alternative activities and reducing unemployment. Moreover, investments in human capital and support programmes to enter more productive activities could also facilitate an increased diversification of rural areas. Non-farm activities are extremely important in terms of rural development, as they absorb the excess labour from agriculture and represent a survival strategy for many rural households by providing income and employment. More importantly, emphasis should be placed on the development of rural small and medium-sized enterprises, which tend to be labour-intensive and thus are likely to absorb labour.

Investment in infrastructure remains crucial for improving rural labour markets, for strengthening rural-urban linkages, and thereby facilitating market access and creating better employment opportunities. A further focus point consists in supporting agricultural extension as well as small business development, reducing capital constraints and providing access to credit, markets, technical information and assistance. Adequate transport and communications are necessary in rural areas to stimulate productivity, provide linkages with the wider economy and thus lead to improved and more efficient labour outcomes. In addition to this, the government can play a role in bridging the gap of incomplete information by strengthening market information systems and assisting rural households in finding more and better employment and training opportunities. In this respect, labour market institutions can improve information about markets, such as providing more information on job opportunities to ease the search for a job. Improving factor mobility, and hence the smooth transition across activities, would improve the functioning of labour markets, with important consequences for the income and the development of people in rural areas.

DETERMINANTS TO LEAVE AGRICULTURE IN THE EU|169

References

Copus, A. et al. (2006), Study on Employment in Rural Areas, Final Deliverable, SERA.

Corsi, A. and J. Findeis (2000), “True state dependence and heterogeneity in off-farm labour participation”, European Review of Agricultural Economics, 27(2):127–151.

Davis, J. and D. Pearce (2001), “The non-agricultural rural sector in Central and Eastern Europe”, in C. Csaki and Z. Lerman (eds), The challenge of rural development in the EU accession countries, World Bank technical paper No. 504, Washington, D.C., pp. 111–130.

de Janvry, A., M. Fafchamps and E. Sadoulet (1991), “Peasant household behaviour with missing markets: Some paradoxes explained”, The Economic Journal, 101(409):1400–1417.

Dries, L. and J.F.M. Swinnen (2002), “Institutional reform and labor reallocation during transition: Theory evidence from Polish agriculture”, World Development, 30(3):457–474.

Ellis, F. (1993), Peasant economics: Farm households and agrarian development, Cambridge: Cambridge University Press.

European Commission (2006), “Employment in Rural Areas: Closing the Jobs Gap”, Commission Staff Working Document, Brussels.

Eurostat (2012), Farm Structure Statistics (http://epp.eurostat.ec.europa.eu/

statistics_explained/index.php/Farm_structure_statistics).

Harris, J.R. and M.P. Todaro (1970), “Migration, unemployment and development:

A two-sector analysis”, The American Economic Review, 60(1):126–142.

Heckman, J. (1979), “Sample Selection Bias as a Specification Error”, Econometrica, 47(1):153–161.

Huffman, W.E. (1977), “Interactions between farm and nonfarm labor markets”, American Journal of Agricultural Economics, 59(5):1054–1061.

Huffman, W.E. (1980), “Farm and off-farm work decisions: The role of human capital”, The Review of Economics and Statistics, 62(1):14–23.

ILO (2008), “Report IV: Promotion of Rural Employment for Poverty Reduction”, International Labour Conference, 97th Session, Geneva.

Johnson, T.G. (1991), “The market for farm family labor”, in M.C. Hallberg, J.L.

Findeis and D.A. Lass (eds), Multiple job-holding among farm families, Ames:

Iowa State University Press.

Juvančič, L. and E. Erjavec (2005), “Intertemporal analysis of employment decisions on agricultural holdings in Slovenia”, Agricultural Economics, 33(2):153–161.

170|TOCCO,DAVIDOVA &BAILEY

Kancs, D., J.F.M. Swinnen and L. Vranken (2007), “Rural labour markets in transition”, in A. Balmann et al. (eds), Conceptual framework for analysing structural change in agriculture and rural livelihoods, IAMO Discussion Paper No. 113, Leibniz Institute of Agricultural Development in Central and Eastern Europe, pp. 13–20.

Kancs, D., K. Van Herck and J.F.M. Swinnen (2009), “A conceptual model on labour adjustments”, Deliverable 7.1, SCARLED Project.

Macours, K. and J.F.M. Swinnen (2005), “Agricultural labor adjustments in transition countries: The role of migration and impact on poverty”, Review of Agricultural Economics, 27(3):405–411.

Pietola, K., M. Väre and A.O. Lansink (2003), “Timing and type of exit from farming: Farmers' early retirement programmes in Finland”, European Review of Agricultural Economics, 30(1):99–116.

Rizov, M. and J.F.M. Swinnen (2004), “Human capital, market imperfections, and labor reallocation in transition”, Journal of Comparative Economics, 32(4):745–

774.

Swinnen, J.F.M., L. Dries and E. Mathijs (2001), “Critical constraints to rural development in Central and Eastern Europe”, in C. Csaki and Z. Lerman (eds), The challenge of rural development in the EU accession countries, World Bank technical paper No. 504, Washington, D.C., pp. 97–110.

Tocco, B., S. Davidova and A. Bailey (2012a), “Key issues in agricultural labour markets: A review of major studies and project reports on agriculture and rural labour markets”, Factor Markets Working Paper No. 20, Centre for European Policy Studies, Brussels.

_____ (2012b), “Supply and demand side limitations affecting the structure of agriculture and the rural economy”, Factor Markets Working Paper No. 21, Centre for European Policy Studies, Brussels.

_____ (2012c), “Labour adjustments in agriculture: Evidence from Romania”, 132nd Seminar of the European Association of Agricultural Economists, Skopje, 25–

27 October.

Tocco, B., A. Bailey and S. Davidova (2013), “Determinants to leave agriculture and change occupational sector: Evidence from an enlarged EU”, Factor Markets Working Paper No. 46, Centre for European Policy Studies, Brussels.

Todaro, M.P. (1969), “A model of labor migration and urban unemployment in less developed countries”, The American Economic Review, 59(1):138–148.

Van Herck, K. (2009), “A Comparative Analysis of Rural Labour Markets”, Deliverable 7.4, SCARLED Project.

| 171

15. A GRICULTURAL L ^{ABOUR AND} F ^ARM