Unequal Fields: How Agricultural Subsidies
Are Reinforcing Income Gaps in Farming
Imre Fertő
The gap in agricultural incomes is no longer a marginal side-effect of farming. It has become a structural feature of European – and especially Central-Eastern European – agriculture.
The recent paper by Imre Fertő shows that farm income inequalities are not just rising; they are being actively reproduced by policy, market and organizational mechanisms.
The question is not simply “Why are incomes diverging?”, but “Why does the system allow (and even reward) this divergence?”
What the numbers tell us
In many countries, and particularly in Hungary, the Gini coefficient for farm household incomes has reached levels between 0.70 and 0.85. Such high figures suggest that inequality is not an aberration, but the norm. The larger farms get the lion’s share of supports, the smaller ones struggle to keep pace, if they survive at all.
Because the system finds ways to embed advantage, the structural differences become durable: large farms build on old advantages, while smaller ones remain locked in a low-income trap. In short: what we are seeing is not simply outcome divergence but opportunity divergence.
How policy reinforces the trend
Why does this happen? A key feature is the way direct payments under the Common Agricultural Policy (CAP) are allocated. Those payments often follow historical entitlements – meaning that yesterday’s large farm gets today’s bigger cheque. The result is a self-reinforcing mechanism: historical privilege becomes present privilege.
The policy logic thus fails to target where need or potential for catching up is greatest. Instead it serves to consolidate size and past success. Where the subsidy system is built into such logic, it acts less like a corrective instrument and more like a cementing glue for existing structures.
Empirical cases across Europe – from Scotland to Italy, from Switzerland to Hungary – show this pattern: the larger the farm, the higher the share of subsidised income, the greater the capacity to absorb shocks. And yet the smaller farms are the ones exposed to the worst volatility and weakest buffers.
The role of volatility and adaptability
Farming is inherently volatile – weather, markets, pests, input costs all contribute to year-on-year swings. But volatility alone does not necessarily cause widening income gaps. The turning point comes when the system’s responses to volatility are unequal. Larger farms invest in advanced machinery, employ stronger risk management, access better credit. Smaller farms often remain in survival mode.
Thus, the policy system sits on top of a marked asymmetry of capacity: because the system rewards size and stability, the risk-absorbing capacity of large farms increases further, while the risk-bearing burden of small farms grows. The inequality is structural, not incidental.
Why this matters beyond the farm gate
We might view agricultural income inequality as a technical matter of farm economics, but its implications are far broader. A farming sector dominated by large units and growing income gaps can weaken rural communities, slow mobility, concentrate land ownership, and erode local resilience. It is not just “which farm makes how much”, but “which rural region survives, which shrinks, which diversifies, which is left behind”.
Policy rhetoric often emphasises “rural development”, “small-farm support” and “sustainable agriculture”. But if actual subsidy design privileges the large, we face a disconnect between what is said and what is delivered. And in that disconnect lie the wider societal costs.
What can change?
The paper suggests a number of pathways to redress the imbalance. Targeting supports based on need, vulnerability or catching-up potential, rather than only on past size, is one. Automatically capping payments or redistributing a portion of large-farm payments to smaller farms is another. Enhancing access to credit, modern equipment, digital technologies for smaller farms could also help level the playing field.
But more than anything, what this requires is a shift in policy logic. From a subsidy regime that rewards historical size, to one that incentivises inclusivity and mobility. From a system that treats farms as isolated economic units, to one that sees farms as part of dynamic rural economies and communities.
Conclusion
When we probe farm income inequality, we see more than just divergent figures. We see a system that reproduces those divergences. Unless we revisit the logic of subsidy allocation, adaptivity and farm-structural change, the agricultural sector will continue to tilt toward concentration, and rural communities will bear the cost. For researchers, policymakers and rural stakeholders alike, the challenge is clear: we must move from seeing inequality as a “side-effect” to recognising it as a built-in logic – and then decide whether that logic is one we want to sustain.
Note to the reader:
The full paper is available here:
Fertő, I. (2025). A mezőgazdasági jövedelmi egyenlőtlenségek szerkezete és szakpolitikai kihívásai. Tér és Társadalom, 39(3), 30-57. https://doi.org/10.17649/TET.39.3.3647
