Regional and structural policy instruments supporting the development of entrepreneurship in the rural areas

In 2007-2013, 1,529 studied rural communes received about PLN 13.1 billion worth of public aid via various operational programmes, Operational Programme Human Capital, Operational Programme Innovative Economy¹⁰. Nearly 63% of total funds from the EU budget for the studied rural areas were received via regional operational programmes, which included both direct support for the development of economic activity and direct support via infrastructural projects.

The impact of regional and structural policy on equalisation of communes with regard to economic development is shown by the findings from the unconditional beta-convergence for commune groups that differ in terms of

10 A. Wasilewski (ed.), EfektywnoĞü instrumentów polityki regionalnej i strukturalnej wspierających rozwój pozarolniczej dziaáalnoĞci gospodarczej na obszarach wiejskich, Multi-Annual Programme 2011-2014, no. 108, IAFE-NRI, Warszawa 2014, p. 126.

absorption of various EU funds oriented towards the development of entrepreneurship (tab. 3.5). The analysis shows that the convergence took place regardless of the level of funds from the EU budget.¹¹ The convergence rate of communes with high absorption level amounted to nearly 5% per annum, which was 1% higher than in the case of communes with low use of those funds. What is more, in this group, the period of reduction of the distance to long-term equilibrium with regard to own income growth per resident in productive age rate by a half was about 14 years, and was 3.5 years shorter than in the case of communes with low absorption levels. This means that a higher financial support level under existing policies has significant impact on the beta- -convergence rate if the disparity in absolute income grows.

Table 3.5. Unconditional ȕ convergence rate and half-life of disparity in own income in 2004-2011 in groups that differ in the use of EU funds under

operational programmes providing support for the development of entrepreneurship per resident in productive age

Specification ȕ -convergence coefficient Half-life Communes with the low level of usage

of Operational Programmes 0.0394 17.6

Communes with the low level of usage

of Operational Programmes 0.0497 13.9

Source: own elaboration based on calculations by M. Gospodarowicz according to the Local Data Base of the Central Statistical Office of Poland.

When we analyse the increase in the absolute number of economic entities in the commune groups divided according to the financial support scale (fig. 3.4), thus excluding the negative impact of the growth in the number of persons in productive age, we can state that the relative financial transfers from the EU budget per capita played an important role in the initiation of business activity by natural persons. In 2007-2012, i.e. in the period when the studied financial instruments were applied, a higher increase in the number of entities was observed in commune groups with higher support level. What was particularly visible was the difference between the first and the fourth quartile, where the increase in the number of those entities throughout the period when the support had impact was 6 percentage points higher. It should be stressed that the higher increase in the number of economic entities was achieved in commune groups where their number was higher at the initial point. In the context of the

11 A. Wasilewski (ed.), SkutecznoĞü instrumentów polityki regionalnej i strukturalnej oddziaáujących na rozwój przedsiĊbiorczoĞci, Multi-Annual Programme 2011-2014, no. 77, IAFE-NRI, Warszawa 2013, p. 124.

increase in the number of business entities run by natural persons, the financial support from the EU can be deemed a quite efficient instrument. The comparative analysis (fig. 3.4) confirms also the positive impact of the scale of support for the development of micro enterprises and the increase in the number of employed persons. What can also be observed is the decelerating impact on the number of unemployed, but this regards only the highest support scale.

Figure 3.4. Economic changes in commune groups divided according to the amount of EU support (division into quartiles) per resident in productive age

Source: own calculations based on the Local Data Base of the Central Statistical Office of Poland.

The stochastic frontier analysis (SFA)¹² with transfer of funds under ROP, Operational Programme Innovative Economy and Operational Programme Human Capital as inputs and new businesses launched by natural persons as outputs shows that technical efficiency of support was quite low (tab. 3.6). The transfer of funds resulted in emergence of less than 37% of entities that could theoretically be created with that transfer scale. The technical efficiency could be improved by quite a significant increase in the scale of support. Scale efficiency is slightly higher than 63%. Nonetheless, financial support from the EU budget significantly contributes to the establishment of new entities.

The efficiency of its use for that purpose differs strongly among communes. The technical efficiency variability coefficient amounts to nearly 68%.

12 Stochastic frontier analysis is a parametric method used for evaluating general activity by defining various relationships between inputs and outputs taking account of the presence of two data components: a random factor and inefficiency. It is based on the assumption that all entities should be capable to act at a certain effectivity level. It makes it possible to separate measurement errors from the component corresponding to inefficiency.

17 16

quartile 1 quartile 2 quartile 3 quartile 4

Table 3.6. Descriptive statistics of technical efficiency gauges and scale of support from the EU budget

Variable Mean Standard

deviation Max Min Median 1 quartile 3 quartile Measure of

technical effectiveness

0.367 0.249 0.996 0.081 0.268 0.190 0.445 Measure of

scale effectiveness

0.631 0.175 1.000 0.280 0.604 0.504 0.752 Source: own elaboration based on calculations by M. Gospodarowicz according to the Local Data Base of the Central Statistical Office of Poland.

3.7. Summary

Poland’s EU membership positively influenced both the macroeconomic environment of agriculture and agriculture, food industry, and rural areas. The most important effects include the drop in the number of farms with the increase in the proportion of the largest farms, drop in the number of people employed in agriculture, as well as increasing concentration and specialisation of agricultural production, improvement in efficiency and competitiveness of food industry, and multifunctional development of rural areas.

The transformation of Polish agriculture and rural areas was financed from farm’s own funds and the state budget until the accession. After Poland joined the EU, the European funds contribute significantly to their development.

The access to the EU funds meant not only a chance for accelerating the development of agricultural sector, but also a big challenge related to the necessity to take measures with the aim of maximising the use of various instruments applied in the EU as efficiently as possible.

The impact of individual CAP instruments on food economy and rural areas differs. The impact of direct payments, investment programmes and programmes related to multifunctional development of rural areas is the greatest, and the influence of typical social programmes, e.g. support for semi- -subsistence farms, is slight. Direct payments are currently the primary support instrument for the agricultural sector in the EU. As they are separated from production (farmer’s production decisions do not depend on the aid they receive or a large portion thereof does not depend on production decisions), the market orientation of agriculture and its competitiveness are improving. Direct payments also play a role in supporting agricultural income, and in long-term they are used to co-finance investment in agriculture. At the same time, they lead to growth in agricultural land prices, which makes increasing farm area

and agricultural transformation more difficult, due to limited land resources (particularly with regard to good quality land).

The impact of EU support varies in specific economic classes, production type categories, and regions. The biggest structural changes took place on farms where the proportion of direct payments in income exceeded the national average (large and the smallest farms). In the spatial approach, they were particularly visible in the northern and western part of Poland. In the case of the largest farms, changes in the earliest years of Poland’s EU membership consisted primarily in the increase of production area, mainly through lease and reduction in land excluded from use (fallow or idle land). Methods of production have also changes – the increase in cost is a proof of identification. Animal production was also reduced and underwent specialisation. The tendency to adjust production in order to maximise income due to direct payments was also visible, particularly on farms where the level of support was lower (horticultural farms, permanent plantations).

The ongoing changes to agriculture, however, lead to strong polarisation in agrarian structure. The group of market-oriented farms that are economically strong and able to compete across the EU has emerged with the group of self- -subsistence farm with social purpose as the opposite. The implementation of investment measures in agriculture contributed to modernisation of the technical production structure of the Polish agricultural sector. Farmers used the support they received primarily to purchase machines and devices, as their machine part was obsolete, and the settlement was easier than settlement of investment in construction. Support for investment was used primarily by large, viable and developing farms. The barrier that stopped many farms, particularly smaller ones, was the necessity of own financial contribution. Investment measures implemented on the basis of public aid contributed to the improvement in competitiveness only in the case of 1/5 of farms across Poland. To a great extent, they also contributed to improvement in work organisation. The problem that remains despite the investments is the ongoing decapitalisation of fixed assets of farms.

Regional research shows that there is a kind of local convergence among rural communes, which is measured by the increase in communes’ own income per resident in productive age. The pace of the process, on the other hand, is related to the scale of various financial instruments of agricultural and structural policy, directly or directly affect the development of non-agricultural business activity. The scale of financial support from the EU budget has also positive impact on the development of non-agricultural business activity in short term – it affects the growth rate of the number of business entities, employment, and,

to a small extent, it decelerated the increase in unemployment expressed using absolute numbers. The local technical efficiency of financial support, however, is quite low. It can be increased by a definite increase in the scale of support, which is virtually impossible due to EU budget constraints.

The sustainability of the effects of the studied instruments will depend on the type of entities they were allocated to – efficient or rent-seeking ones.

A higher level of support, however, was reported in communes with higher economic development level. This means that efficient entities are more likely to obtain assistance. In consequence, such distribution results in increased disparities in the economic development of rural areas. This leads to the question about the model of development that will receive political aid, particularly when there are limited opportunities to support it using public funds.

References

Bal-DomaĔska B., Ekonometryczna identyfikacja ȕ konwergencji regionów szczebla NUTS-2 paĔstw Unii Europejskiej, Acta Universitatis Lodziensis, Folia Oeconomica 2011, no. 253, pp. 9-21.

Chechelski P., Grochowska R., Wigier M. (eds.), Wsparcie publiczne i konkurencyjnoĞü polskiej gospodarki ĪywnoĞciowej, Multi-Annual Programme 2011-2014, no. 129, IAFE-NRI, Warszawa 2014.

Chechelski P., Grochowska R., Wigier M. (eds.), Wyzwania i ograniczenia dáugookresowego rozwoju rolnictwa i obszarów wiejskich w Polsce, Multi- -Annual Programme 2011-2014, no. 42, IAFE-NRI, Warszawa 2012.

Czubak W., Sadowski A., Wigier M., MrówczyĔska-KamiĔska A., Inwestycje w rolnictwie polskim po integracji z Unią Europejską, Wydawnictwo Uniwersytetu Przyrodniczego w Poznaniu, PoznaĔ 2014.

JudziĔska A., àopaciuk W. (eds.), Wpáyw WPR na rolnictwo w latach 2004-2012, Multi-Annual Programme 2011-2014, no. 118, IAFE-NRI, Warszawa 2014.

JudziĔska A., àopaciuk W. (ed.), Wpáyw WPR na zmiany w rolnictwie w ujĊciu regionalnym, Multi-Annual Programme 2011-2014, no. 76, IAFE-NRI, Warszawa 2013.

JudziĔska A., àopaciuk W. (eds.), Wpáyw Wspólnej Polityki Rolnej na zmiany w rolnictwie, Multi-Annual Programme 2011-2014, no. 38, IAFE-NRI, Warszawa 2012.

KokociĔska M. (ed.), Etapy konwergencji w rozwiniĊtych krajach Unii Europejskiej, Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu, PoznaĔ 2012, pp. 44-48.

àopaciuk W., Zmiany w polskim rolnictwie a WPR w opinii rolników, [in:]

A. Kowalski, P. ChmieliĔski, M. Wigier (eds.), Ekonomiczne, spoáeczne i instytucjonalne czynniki wzrostu w sektorze rolno-spoĪywczym w Europie, Multi-Annual Programme 2011-2014, no. 67, IAFE-NRI, Warszawa 2013, pp. 221-229.

Pawáowski G., Wykorzystanie analizy efektywnoĞci funkcjonowania instytucji publicznych w aspekcie konkurencyjnoĞci regionów, Polityka Gospodarcza 2000, no. 3, pp. 65-71.

Pawáowski J., Wybrane metody oceny efektywnoĞci finansowej przedsiĊwziĊü gospodarczych, Wydawnictwo Uniwersytetu àódzkiego, àódĨ 2007.

Próchniak, M., Rapacki, R., Konwergencja typu beta (ȕ) i sigma (ı) w krajach transformacji w latach 1990-2005, pp. 146-151, [in:] Rapacki R. (ed.), Wzrost gospodarczy w krajach transformacji, PWE, Warszawa 2009, p. 304.

Wasilewski A. (ed.), EfektywnoĞü instrumentów polityki regionalnej i strukturalnej wspierających rozwój pozarolniczej dziaáalnoĞci gospodarczej na obszarach wiejskich, Multi-Annual Programme 2011-2014, no. 108, IAFE-NRI, Warszawa 2014.

Wasilewski A. (ed.), SkutecznoĞü instrumentów polityki regionalnej i strukturalnej oddziaáujących na rozwój przedsiĊbiorczoĞci, Multi-Annual Programme 2011-2014, no. 77, IAFE-NRI, Warszawa 2013.

Wigier M., Polityka rolna i zmiany strukturalne w rolnictwie polskim po akcesji do UE, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocáawiu 2014, no. 361.

prof. dr hab. Józef Stanisáaw Zegar