Epsilon Archive for Student Projects

Abstract

This study examines the relationship between rural development support and herd size among Swedish dairy farms. Using farm-level panel data from the Swedish Farm Accountancy Data Network (FADN) for the period 2011–2021, the analysis investigates whether CAP rural development support is associated with changes in dairy herd size and whether this relationship differs across farms of different sizes. Pooled OLS, fixed effects models, subsample regressions, and quantile regression are applied to estimate both average and heterogeneous relationships, under assumptions regarding selection and unobserved heterogeneity.

The results suggest a positive relationship between rural development support and herd size, although the estimated average effect is relatively small. In the fixed effects specification, a 100 percent increase in rural development support is associated with approximately a 1.1 percent increase in herd size. The dynamic GMM results, which account for persistence in herd size and potential endogeneity associated with rural development support, provide further support for this relationship. In this specification, a 100 percent increase in rural development support is associated with approximately a 2.5 percent increase in herd size. The quantile regression results indicate that the relationship is stronger among smaller and medium-sized farms, while no statistically significant relationship is found among larger farms. Overall, the findings suggest that rural development support may contribute to farm expansion, but that the magnitude of the effect is modest and differs across the herd size distribution.