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Abstract
The paper uses the case of Flemish investment support to make a quantitative analysis of pillar
II support based on micro-economic data from the FADN and the administrative dataset of the
investment support fund. A dynamic panel estimation quantifies the effect of support for settingup
young farmers, structural investment support and support for investments on farm
diversification, animal welfare or environmental investments.. The results show that investment
support for farm diversification and structural support increase the total output and the income.
Environmental investment support increase costs and decrease the farm income without a
significant impact on output. The conclusion for the national debate is that the structural and
the diversification investment support is effective while the environmental investment support is
too low to cover all additional costs in the short run. The conclusion for the international
debate is that, except for the structural investment support, the Flemish investment support is
not distortive for international agricultural markets.