Marketing and subsidy effects on farm income distribution: evidence from Kosovo

This paper investigates the effect of instruments of agricultural policy support and marketing contracts on the farm income distribution in Kosovo.Unconditional quantile regression was employed allowing for heterogeneity in preferences and risk aversion.The empirical results indicate that several policy measures and some attributes of marketing contracts exacerbate income inequality.Direct payments and more detailed marketing contracts favour disproportionally the higher income farms.Investment subsidies and improved buyers' compliance with the terms of marketing agreements, on the other hand, are most beneficial to the lower income farmers and thus can result in more equitable farm incomes distribution.The large share of direct payments in the present agricultural budget in Kosovo is therefore misplaced since it uses scarce public resources without improving the situation of small low-income farms.