State Aid Distribution and Risk Management in Agriculture

This paper uses individual farm data on state aid in agriculture to evaluate the distribution of state support for the period 2018 to 2022.Every state aid to farmers needs to be notified by European commission to prevent overcompensation and to guarantee competitiveness of all Member states (MS).Otherwise, rich MS can support farmers with higher compensations which can decrease the competitiveness of farmers in other MS.In Slovakia, the amount of state aid differs across farms due to the farm structure, which is dominated by large farms.Total amount of state aid to farmers increased significantly from 4.35 mil.EUR in 2018 to 104.15 mil.EUR in 2022.Support was paid to farmers via 12 state aid schemes in form of environmental taxes compensations, participation on exhibitions, damages on crop and animal production, insurance premium subsidies and others.The state aid is supporting mainly large farms in Slovakia.92% of the total state aid was received by beneficiaries -legal persons.Only 8% of the financial support was paid to small farmers -natural persons.The state aid is unequally distributed in Slovakia.We analyzed 2 state aid schemes: i) Insurance premium compensations and ii) Green diesel compensations using Lorenz curve and Gini coefficient.Both do show high level of inequality.50% of all beneficiaries within each scheme receive only 8.59% of the total state aid in case of Insurance premium compensation and only 5.29% of the total state aid in case of Green diesel.Based on results of state aid concentration and inequality we recommend setting limits on volume of state aid per beneficiary.