This paper investigates the contribution of different off-farm income sources and Common Agricultural Policy direct payments on income inequality among farm households. The analysis uses the Gini coefficient concept and its decomposition on the whole sample of Farm Accountancy Data Network individual farms of Italy in 2011. A marginal increase in either off-farm incomes or direct payments reduces income concentration. This result could feed the current debate regarding the application of the new CAP in Italy. Deciding on a narrow definition of “active farmer” or not using the redistributive payment could increase DP and FHI concentration. Of the five considered off-farm income sources, only pensions reduce income concentration. Therefore, policies reducing the level of pensions will increase income inequality. Finally, if rural development policies have also to reduce income inequality, these should be aimed at increasing job opportunities for additional family members.


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