Tropentag, October 5 - 7, 2004 in Berlin "Rural Poverty Reduction through Research for Development and Transformation"

The Impact of Social and Human Capital on Farm Income - the Case of Polish Farmers

Institute of Agricultural Development in Central and Eastern Europe (IAMO), Department of External Environment for Agriculture and Policy Analysis, Germany

Abstract

All over the world small scale farmers are characterized, among others, by a lack of management skills, market information and capital, and by rather low levels of income. One option to overcome this situation might be the substitution of limited production factors with one which is more readily available. The existence of such a factor is being analysed under the concept of social capital. It reflects the ability of the people to co-operate with each other. It is revealed in the existence of formal organisations and informal networks of the agricultural producers to pursuit their own interests and to improve their economic situation. This issue is of particular relevance not only to farmers in developing countries, but also to their colleagues in transition economies as such types of organisations did not exist under the socialist regime and had to be built up from scratch since 1990.
As a first analytical step, this hypothesis is tested in making use of data of a Polish farm survey executed by IAMO in 2000. Six independent factors could be extracted from a set of 15 variables by factor analysis, i.e. life and job experience, participation in further training, physical capital, production structure and used labour, informal exchange of experiences, and social capital and education. The results show that social capital depends on education and can be identified as an influencing factor. Four of the six factors represent personal characteristics of farm owners that can be seen as indicators for managerial skills. These are life and job experience, participation in further training, informal exchange of experiences, and social capital and education. It has to be noted that these factors exist independently from each other.
In addition, cluster analysis and discriminatory analysis were used to identify groups of homogenous farms. Seven groups can be distinguished representing Polish farms fairly well. In comparing the groups it is shown that the effects of social and human capital on economic welfare differ widely. It can be concluded that, on the one hand, farmers managing large farms accumulate social capital for improving farm income. On average, they are younger and better educated. But, on the other hand, there is a group of farmers operating medium farms with a high level of social and human capital who earn a higher percentage of their family income from off-farm sources. These farmers may use their social and human capital to exploit alternative sources of income. Finally, there is a group of farmers owning small farms who do not invest in social capital with respect to agricultural production at all because their major source of income is off-farm.

Keywords: Farm income, human capital, Poland, small scale farming, social capital

Contact Address: Axel Wolz, Institute of Agricultural Development in Central and Eastern Europe (IAMO), Theodor-Lieser-Straße 2, 06 120 Halle (Saale), Germany, e-mail: wolziamo.de