LAS MEMORIAS DE LOS APÓSTOLES
5. Historia e interpretación
For the funding period investigated, the EAFRD framework draw the focus of actual contractual design – concerning both the contractual relationship between EU and Hessian administration and between Hessian administration and farmers – to counteracting potential opportunistic behaviour in a more or less ‘one-size-fits-all’ approach.
As a consequence, allocative effects occur with respect to the particular cost categories. The focus on monitoring issues in contractual design is resembled in the high proportion of monitoring costs among total TCs. This accounts for both the administration and farmers during actual scheme implementation as well as for the substantial share of reporting costs found to state the administrations’ own compliance with the EAFRD regulations.
Allocative effects also occur between particular administrations and between particular ‘types’ of
farm businesses. In case these differences result from differences in farmers’ opportunity costs of time (see chapter 5), a correction of the allocative effect would not be required in principle. In that case, TCs would be the expression of particular farmers’ preferences respectively their willingness to pay for participation.
However, the amount of time spent by farmers on negotiation and documenting issues is crucial for another reason: higher negotiation and documentation expenses go in line with fewer deviations found and thus lower costs on behalf of the administrations for tracking farmers. For the Hessian administrations, this indicates scheme success and in consequence requires less supervisory control by the EU.
Two recommendations come up from these insights. First, as the decision on how much to invest in negotiation and documentary issues is currently up to the farmers themselves – and, as shown, practised very differently by different ‘types’ of farmers – providing incentives particularly for part- time farmers’ to increase their effort on bilateral negotiation and their documentary duties seems to be a crucial issue. This could be pursued either by the ALRs in a regulatory approach or by providing incentives for the farmers. As article 3 has revealed, inducing the ALRs to increase their effort on such scheme-related tasks requires an increase in the incentives provided. Following the multi-task PA- approach, either an increase in regulating the provision of scheme-related tasks or a decrease in regulating reimbursement-related tasks should take place. With the help of such a regulatory approach, a specified level of information and negotiation would be made obligatory for farmers prior to scheme participation. Of course, this would mean an increase in farmers’ TCs, which, however, would be partially weighed out by the subsequent lower effort to correct deviations, and fewer payment subtractions. This leads to the second recommendation:
Actually, farmers incur substantial TCs without being compensated while the administration also participated from the related gains. Consequently, Hessian scheme regulations should integrate a TC reimbursement component into the payment calculation. In addition to a more balanced allocation of transaction costs and gains, such a compensation of TCs might provide an incentive for part-time
Concluding Discussion
118 farmers to invest more of their time in negotiation and documentation issues, particularly if these are more enforced by the ALRs.
Finally, a number of allocative losses were found because actual scheme regulations do not account for variances in compliance, neither on the side of the administration nor on the side of the farmers (see section 2.2.2.1). A large amount of theoretical and empirical evidence suggests that TCs can be saved by allowing for different treatments of different types of farmers – an argument that also applies to different types of administrations (see article 2). Moreover, within the structural features investigated, scheme design and implementation regulations hamper the ability to obtain economies of scale, scope, and time for both the administration and farmers. Furthermore, article 2 (see chapter 6) highlighted a number of TCs related to the lacking adaptation possibilities of contracts with farmers during the participation period.
Apart from these allocative effects, the article results revealed also a number of distributive effects occurring between EU and Hessian administrative levels as well as between single county administrations. In the funding period 2007-2013, the state of Hesse had to bear the full costs for implementing the EAFRD while only receiving a partial reimbursement of payments to farmers. Setting up and running the structure and procedures required by the EAFRD induced a number of fixed costs. As a consequence, counties with fewer contracts bear a higher share of these costs. To mitigate such distributive effects, a (co)-financing of regional administrative costs for EU-related issues by the EU was recommended in article 2 (see chapter 6). An at least partial reimbursement of regional administrative costs would facilitate the situation of poorer member states or regions and provide for a more balanced occurrence of costs and benefits and thus result in better TC efficiency. Such cost sharing should easily be integrated into the given reimbursement structure.
Besides such practical implications, an important result of this thesis from a theoretical point of view is a relationship between TCs incurred and particular risk management attempts for both public and private actors. In particular, TCs incurred – especially those incurred on ‘voluntary base’ - seem to resemble the actors’ ‘willingness to pay’ in order to secure income (for farmers) or the budget (for Hesse). This finding should be corroborated by future (empirical) research to mitigate the limits of this case study approach (see section 1.2). Attention of future research should also be drawn on a relationship between participation motives of farmers and related TC expenditure. While a number of studies have investigated participation motives of farmers (see e.g. Siebert, Toogood, and Knierim [2006] for an overview), little is known about whether such motives are mirrored in participation- related TCs. In addition, such a relationship might also exist for the administrations in the EU member states: It would be interesting to know whether particular budgetary needs and a related need to receive the (full) EAFRD reimbursement are mirrored in the related public TCs.