Horváth, Péter

Pető, Károly

English

University of Debrecen Electronic Archive

 
194 
 
THE DISPERSION OF AGRICULTURAL AND RURAL DEVELOPMENT EU FUNDS ON 
A REGIONAL AND DISTRICT LEVEL IN HUNGARY 
 
Péter Horváth
1
, Károly Pető
2
 
 
1
University of Debrecen, Faculty of Economic Sciences, Institute of Rural Development, 
Tourism and Sports Management, Department of Rural Development and Regional 
Economics, Debrecen, Hungary 
2
University of Debrecen, Faculty of Economic Sciences, Institute of Rural Development, 
Tourism and Sports Management, Department of Rural Development and Regional 
Economics, Debrecen, Hungary 
 
horvath.peter@econ.unideb.hu 
peto.karoly@econ.unideb.hu 
 
Abstract: A national objective was realised when Hungary joined the European Union 
based on the preliminary result of the referendum. Naturally, there were pros and cons 
about the accession and there were those who refused the European integration. Still the 
emotion was stronger that came from the future EU membership and the hope in terms of 
the agriculture that with the opportunities offered by the EU both the Hungarian agriculture 
and countryside would follow a development course. Because of the accession a lot of 
support forms as well as the EU institutions became available but considering the impacts 
there were no clear positions. Obviously, today we know what kind of objective, positive 
changes were brought by the accession for example in terms of infrastructural and 
machine supply, broadened market possibilities and income growth. Stil l we also 
experience the objective disadvantages such as the stronger competition and the mass 
expansion of multinational food-processing and trading companies. The scientific 
measurement and judgement of the developmental changes which are difficult to measure 
is still a subject of debate. We have done the concentration analysis for two budget 
periods 2004-2006 and 2007-2013 respectively. Between 2004-2006 the regional 
concentration is more balanced year by year than the district. In the district values even in 
this period we can already experience the fact that very few farmers receive a big amount 
of support. Between 2007-2013 there are no sharp differences in the case of 
concentration neither in the region nor in the district. The Lorenz curve shows a classic 
concentration distribution in the Southern Great Plain Region every year. The course of 
Lorenz curves is supported by the value of the concentration ratio which is the total share 
of the support of the three players receiving the biggest funds since the indicator has been 
hovering around the 10% average value in the region since 2006 while in the district we 
can experience values within a 36% and 17% average intervals. By evaluating the funds 
data of the Southern Great Plain Region and Sarkad district we can state that by 2013 the 
concentration has balanced out in both areas still we can experience a significant funds -
concentration on the district level. 
 
Keywords: agricultural and rural development subsidies, EU payments, Lorenz curve, 
Hirschman-Herfindahl index, concentration ratio 
 
JEL classification: Q18 
1. Introduction 
In the first half of the 20th century the state was primarily expressed through the tax 
system and the relationship between the different enterprises while from the second half of 
 
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the century the state funds have received a more emphasized role in Hungary. After 
Hungary’s accession to the European Union the system of agricultural and rural 
development funds were regulated by the framework of the Common Agricultural and 
Rural Policy in which applicants could receive EU, national and co-financed funds. Among 
the certain support forms the direct payments and the support of the regional development 
programs were significant. On the basis of experiences of the past periods we can state 
that the direction of funding policy tends to point towards the less market – and trade – 
distorting funds and in terms of funding the Hungarian farmer society the accession has 
made a positive impact. The following figures show the point; while between 2002-2003 
the agricultural and rural development funds were 210-220 billion HUF from 2004 on it 
reached around 400 billion on a national level (Kapronczai, 2011). 
 
2. The examination of the distribution of the agricultural and rural development 
funds 
For the examination of the funds-distribution we used the funding data of the Agricultural 
and Rural Development Office (ARDO) between 2004 and 2013. The available database 
provided different grouping possibilities in terms of funds. The demarcations for the funds 
were the following: Total funds, EU funds, National funds, European Agricultural 
Guarantee Fund (EAGF), European Agricultural and Rural Development Funds (EARDF), 
Income supports, Investment and rural development funds. To measure the regional and 
district concentration of the funds we chose the Southern Great Plain Region and the 
Sarkad district where different concentration measurement methods were applied. The 
Lorenz curves were originally used for measuring the income distribution where 
concentration was depicted in a single-unit square where the cumulated relative value 
amounts are shown in terms of cumulated relative frequency. If the certain units have the 
same share in the value amounts then the cumulated relative frequencies and the 
cumulated relative value amounts match. In this case a lack of concentration is shown and 
then the curve matches the diagonal of the unit square (Kovács, 2011; Elte 2005). The 
concentration ratio (CR) both in terms of calculating and data needs is the simpliest way to 
create a concentration metrics. The CR concentration ratio shows how the biggest unit of 
the plurality gets a share from the whole value amount. If the whole value amount belongs 
to the chosen unit then it takes up a maximum value, in case of consistent distribution it 
has a minimum value. In practice the visualization of the 3-5 highest value share of the 
total value amount is the most well-spread. Another definitive metrics of the concentration 
is the Hirschman-Herfindahl index. When calculating the index it correlates to the main 
diagonal of the Lorenz curves that is, it equals the sum of squares of the value amount of 
the certain units. It takes a maximum value in case of total concentration, in that case the 
value is 1 or if the share of all units is equal then it takes the minimum value of 1/n. Since 
the metrics take into account the number of the units therefore the distribution of value 
amount within 100 units  means a lower level of concentration than by examining 10 
distributions (Hunyadi and Vita, 2008; Kerékgyártóné et al., 2001). 
 
 
Results and Evaluation 
By comparing the funding data of the Sarkad district and the Southern Great Plain Region 
the gradually increasing funding is well-depicted. The earmarked 400 billion HUF for 2004 
couldn’t be used because the Hungarian institutional system was not prepared enough so 
on a national level only 156 billion HUF reached the farmers consequently the majority of 
the Single Area Payment Scheme was transferred to 2005. This unpreparedness is 
reflected in the comparison of regional and district data since on a district level only 100 
million HUF was paid out in 2004 and on the regional level 3,5 billion HUF (Figure 1.) From 
 
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2005 on the national payments were between 410 and 430 billion HUF which was about 
1.5-2 billion on a district level and between 70 and 80 billion HUF on a regional level. We 
can generally say that in 2009 the subsidies rose sharply on a national level and it followed 
a similar method on a district level with a 2.3 billion HUF payment and on a regional level 
with a close to 120 billion HUF payment. Among the primary reasons of the national 
increase the sustained growth factors did not play a significant role but rather the early 
payments, the currency profit and the sugar subsidies. This also explains why the 2009 
funding level could not be repeated since in 2010 the paid funds were decreased by 130 
billion HUF. The data tell a different story though in the Sarkad district and the Southern 
Great Plain Region since the per capita funding is just slightly less than the 2009-value. 
Increase can be experienced in 2011 due primarily to the lower Single area payment 
deposits which on a district level did not even reach 1 billion HUF compared to previous 
year’s 1.6 billion HUF. The outstanding growth both on a district and regional level was due 
to the fact that the majority of Single area payment funds of 2012 were paid in that year 
and the deposits of 2013 were also added to that sum.  
 
 
Figure 1: The per capita paid subsidies in the Southern Great Plain Region and the 
Sarkad district 
Source: based on own measurements and ARDO data 
On the whole we can say that on the basis of the Southern Great Plain Region and Sarkad 
district payment data that the level of per capita payments turned out to be similar and no 
drastic changes happened. Because of the agricultural aspect of the district and the 
significant role of agriculture there the level of support per capita is continuously reaching 
higher values compared to the total population. Obviously the low urbanisation level of the 
area even on a national level and the significance of agricultural activities among its 
population contribute to this result. On a regional level though among the population of 
several cities such as Kecskemét, Szeged, Békéscsaba participation in the industrial and 
tertiary sector is more characteristic and in their cases the agricultural and rural 
development funds are less prevailing. 
If we look at the distribution of the paid subsidies in terms of their targets (Figure 2) it is 
clearly visible that since the EU accession the income support has a primary role in the 
Sarkad district and the share of Single Area Payment is the most significant. The rate of 
investment and the rural development subsidies started to increase mainly in the budget 
period of 2007-2013. It doubled from 2006 to 2007 reaching 160 million HUF which was on 
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the one hand due to the increase of the  available amount of resources and on the other 
hand after the initial inexperience the growing willingness to apply. As a result of the 
process the amount of paid subsidies reached around 760 million HUF in 2012 in the area 
and the tendency was similar in 2013, as well. 
 
 
Figure 2: The distribution of paid subsidies based on their targets in the Sarkad district 
Source: based on own measurements and ARDO data 
 
To define the concentration of the subsidies we also made comparisons in terms of 
regional and district data. To illustrate the development of funds concentration after the EU 
accession we used Lorenz curves. In the analysis we examined two periods, the budget 
periods of 2004-06 and 2007-13 respectively. By comparing the single years of the 2004-
06 budget period we experienced a much more balanced concentration on a regional level 
in terms of total funds than on the district level. In the case of regional funds concentration 
we can see a gradual increase year by year however we can state that the differences 
between the relative value amounts and the relative frequencies are much more balanced 
than the district values. The concentration values of the Sarkad district developed more 
differentially in this period. The reasons of the well-marked differences between the year of 
accession and the years 2005 and 2006 stem from the fact that because of  the 
institutional unpreparedness (ARDO) and the deficiencies of the Integrated management 
and control system the payment of funds were delayed and only few people received 
funds. The process is clearly outlined on the figure since there is no outstanding difference 
between the relative frequencies and the value amounts. In 2005 and 2006 we can 
experience a high concentration difference as the curve moves away more from the 
diagonal of the unit square so we can sense that few funded receive big subsidies. The 
phenomena can be explained by the fact that the delayed subsidies of 2004 were paid in 
2005 but this would not justify the great concentration difference of 2006 and the 
concentration developments of 2007-2013 (Figure 3-4). 
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Income subsidies Investment and Rural Development subsidies
 
198 
 
 
Figure 3: Funds concentration in the Southern Great Plain Region between 2004-2006  
Source: own measurements on the basis of ARDO data 
 
 
Figure 4: Funds concentration in the Sarkad district between 2004-2006  
Source: own measurements on the basis of ARDO data 
 
It is characteristic for the 2007-2013 period that there are no sharp concentration 
differences in terms of the certain years. The regional data show classic concentration 
dispersion (Figure 5) while on the district level (Figure 6) the high concentration remained 
for every single year moreover for the years 2001 and 2012 we witness a slight increase. 
We can state in terms of both levels that the curves show that the funds dispersion evened 
out.  
 
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Figure 5: Funds concentration in the Southern Great Plain Region between 2007-2013  
Source: own measurements on the basis of ARDO data 
 
 
Figure 6: Funds concentration in the Sarkad district between 2007-2013 
Source: own measurements on the basis of ARDO data 
 
The concentration differences between the certain NUTS levels are perceptible the 
simpliest way by the CR concentration ratio. In our research we matched the share of the 
total funds of the three biggest regional and district players (Table 1). The data of the table 
depicts that the share from the total funds of the three biggest funded players confirm the 
results of the Lorenz curves. On a regional level we experience that the amount of 
concentration ratio after the years of 2006, when the increase stopped continuously moves 
around 10%. By contrast the district numbers convey the concentration even in these 
figures. The highest concentration in 2005 was more than 36% and from 2007 on the 
share of the biggest players were 17%. 
  
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2007 2008 2009 2010
2011 2012 2013
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Table 1: The changes of CR concentration in each year (%) 
  
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 
Southern 
Great 
Plain 
Region 
CR1 3.53 5.75 7.39 6.22 4.60 6.08 5.02 4.93 5.49 4.71 
CR2 3.43 4.28 5.15 3.27 2.92 3.35 3.18 3.83 3.32 3.55 
CR3 2.50 3.47 3.14 3.12 2.77 2.98 2.93 3.31 3.06 3.21 
Sarkad 
district 
CR1 4.14 16.71 11.48 7.82 6.87 8.63 9.72 15.76 18.91 11.90 
CR2 3.21 12.29 10.49 3.82 3.25 3.03 2.36 4.32 2.00 2.16 
CR3 2.88 8.61 8.09 3.17 2.72 3.02 2.24 4.11 1.57 2.16 
Source: own measurements on the basis of ARDO data 
 
In terms of the Hirschman-Herfindal index (HH index) or in another name the concentration 
index, the table does not serve as a comparison but only shows how the value of the index 
changed in each year. We cannot talk about a comparison in this case because I 
conducted different number of element research on a regional and district level which 
greatly defined the minimum of the index on each level. The change can be clearly traced 
though in the yearly values (Table 2). 
  
Table 2: The development of Hirschmann-Herfindal index in each year in terms of funds 
utilisation  
 
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 
Southern 
Great 
Plain 
Region 
0.0101 0.0141 0.0174 0.0130 0.0115 0.0135 0.0119 0.0135 0.0127 0.0124 
Sarkad 
district 
0.0072 0.0567 0.0380 0.0155 0.0114 0.0154 0.0159 0.0337 0.0403 0.0197 
Source: own measurements on the basis of ARDO data 
 
We chose 2006 as a reference year (Figure 7) since in 2004 extremely few funds were 
paid while in 2005 extremely lot as they compensated for the lost amounts of 2004. In 
terms of 2006 we can talk about a balanced year so that is why this is the first year which 
is suitable for the comparison.  
 
Figure 7: The extent of regional and district concentration change on the basis of HH 
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HH index in the Southern Great Plain Region
HH index in the Sarkad district
 
201 
 
index (2006=100%) 
Source: own measurements on the basis of ARDO data 
 
On the basis of the HH index changes the result of the Lorenz curves are better outlined. 
Between 2004-2006 the regional concentration indexes continually rose while the district 
values reached their highest value in this period in 2005. In the 2007-2013 budget period 
the regional HH indexes show almost identical changes. In terms of district the changes 
compared to the reference year of 2006 are much bigger. On the basis of HH indexes we 
can state here also that despite the concentration growth of 2011 and 2012 the 
concentration of funds balanced out in this period. 
 
5. Conclusions 
Based on the analysis of the concentration data we can state that on a regional level the 
funds concentration balanced out by the end of 2013 and a similar process went under 
way on a district level. The regional funds concentration data are much lower on the basis 
of the Lorenz curves unit square diagonal and curves results. In terms of the Sarkad 
district, although the concentration gradually balanced out still the funds have reached the 
funded much more concentrated. 
 
6. References 
Kapronczai, I. (2011) A magyar agrárgazdaság napjainkban, Gazdálkodás, 55. évfolyam 
7. szám, 615-628. 
Hunyadi, L. and Vita, L. (2008) Statisztika I., AULA Kiadó, Budapest, 348. 
Elte (2005): Területi egyenlőtlenségek, ELTE Regionális Földrajzi Tanszék, 1-33. 
Kerékgyártó, GYNÉ. Mundruczó, GY. and Sugár, A. (2001): Statisztikai módszerek és 
alkalmazásuk a gazdasági, üzleti elemzésekben, AULA Kiadó, Budapest, 446. 
Kovács, I. (2011) A jövedelemeloszlás és jövedelem-egyenlőtlenség a 
személyijövedelemadó-bevallási adatok tükrében, Statisztikai Szemle, 89. évfolyam, 3. 
szám, 294-312. 
  


The dispersion of agricultural and rural development EU funds on a regional and district level in Hungary

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The dispersion of agricultural and rural development EU funds on a regional and district level in Hungary

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