Market Versus Agriculture in Poland – Macroeconomic Relations of Incomes, Prices and Productivity in Terms of the Sustainable Development Paradigm

Abstract

Abstract. In the article macroeconomic relations of prices, productivity and incomes in Polish agriculture in the context of changes in the EU Common Agricultural Policy were studied. The authors have developed a macroeconomic model which explains these relations and confirms the occurrence of market failures in agriculture in Poland. The developed model proves the existence of a puzzling exchangeable relation between the real productivity of production factors in agriculture, and agricultural incomes, under conditions of adaptive expectations. It also proves that it is price scissors, not the efficiency of production, that have a dominating influence on incomes in the sector. The authors propose the hypothesis that correction of market mechanisms by government intervention in agriculture is an objective necessity. However, direct subsidies (area payments) do not have a correcting role, but reinforce King's effect.

Public Goods Versus the Farm Price-Cost Squeeze: Shaping the Sustainability of the Eu’s Common Agricultural Policy

“…The idea of the agricultural treadmill is quite simple but powerful. In an economy where technological advance reduces the per unit costs of production, producers who adopt a new technology early on realise increased net returns, because the new technique reduces their costs while aggregate supply is not increased sufficiently to lower prices (Gabre-Madhin, Barrett, & Dorosh, 2002;Czyżewski & Majchrzak, 2018). As the first adopters accumulate income gains, other farmers adopt the technology until its widespread usage results in a shift in the aggregate supply and a lower commodity price.…”

The Market Treadmill Against Sustainable Income of European Farmers: How the CAP Has Struggled with Cochrane’s Curse

“…Some researchers [2,23] claimed that usually only first adopters of technological progress in agriculture benefit, because they can decrease cost of production whereas prices do not fall simultaneously. However, this lasts only for a short time and concerns mainly large farms.…”

“…The concept is derived from studies carried out by Willard Cochrane on agriculture in the USA at the end of the 1950s and the beginning of the 1960s [1]. Sometimes, this effect is also called "the drainage of economic surplus" [2]. The essence of the treadmill in agriculture is that farm income does not grow in parallel with increased productivity.…”

Drivers for farmland value revisited: adapting the returns discount model (RDM) to the sustainable paradigm

“…Secondly, the neoclassical approach implies acceptance of the assumption that there does not exist a dichotomy between the money market and the market for goods (Czy_ zewski & Majchrzak, 2018). In view of the analysis that will be presented below, attention should be given here to the importance of monetary policy in determining farmland prices.…”