Difference between agriculture and non agriculture.
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Answer:
Support of agriculture is justified, among others, by its contribution to rural economic
development. Nevertheless, the relation between agricultural and general economic
development may be ambiguous. On the one side, agriculture may affect other sectors
positively via multiplier and income effects. On the other side, competition effects may
arise due to the application of common factors, specifically labour, by agriculture and
other sectors. Under these circumstances, support of agricultural production may create
distorted market signals and thereby affect the medium and long-term economic
development negatively. This research analyses the regionally differentiated relation
between the agricultural and the non-agricultural development empirically. The panel
estimation model applies data of the common regional accounts from NUTS3 regions of
the EU27. It identifies different development regimes with different roles for agriculture.
In the most developed economies, competition effects dominate. Nevertheless, in low-
productivity regions of Eastern Europe, agriculture stabilises the development of
employment and value added. Thereby, policy faces the challenge to support
simultaneously structural change in agriculture and the development of other sectors in
rural regions.
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