**Farms Multifunctionality, Households Incomes and Sustainable Rural
Development**

*Marco Ballin, Andrea Mancini, Edoardo Pizzoli*

Istat, Italy

**Abstract**

Sustainable rural development has become one of the main pillars of the
Common Agricultural Policy in European Union. This creates new demands
to the statistical system on agriculture and, in particular, new
information needs on farms economic results and on rural households
income addressed to NSI.

This paper deals with an assessment of statistical relationship among
variables related to farms multifunctionality, farms economic
performance and households off-farm incomes. The analysis is performed
on micro-data gathered in Italy by different surveys on farms belonging
to the same population: the 2000 Farm Structural Survey (FSS) and by the
Business Survey on Agriculture (RICA-REA). The former was conducted as a
decennial census survey, the latter is a sample survey on farms, that
has been carried out yearly since 1998. The results of the statistical
analysis are discussed in order to point out the strengths and weakness
of the Italian approach implementing an integrated system of economic
statistics applied to the agriculture sector.

**keywords:** multifunctionality, households incomes, sustainable
development, rural development.

**1. Introduction**

The aim of this work is to evaluate the capacity of statistical analysis
over key economic issues related to the agriculture sector disclosed by
the integration of data produced by different surveys on farms belonging
to the same population.

Multifunctional farms and the income structure of agriculture households
are the economic aspects discussed through the paper. To this
perspective new needs of statistical information arise from the
agricultural policies, that in European Union are increasingly focused
on rural development in a context of socio-economic and environmental
sustainability. It follows that new nomenclatures have to be defined,
specific variables have to be introduced in farms' statistical surveys
and final results have to be evaluated in terms of enhanced statistical
information for policy making.

Two statistical aspects are further discussed through the paper. First
of all, the overall design of statistical surveys has to be orientated
to data integration, facing the well known constraints in terms of
direct costs of data collection and statistical burden on respondents.
Secondly, data integration techniques may be different in relationship
to data collection methods. In this work, the integration of data from
the agricultural census and from a sample survey has been done at farm's
level with respect to the same reference year. Nevertheless further
integrations of estimates coming from different sample surveys will
become feasible in Italy, if based on the same population list derived
from census or administrative registers.

In the first two sections of the paper definitions are presented to
measure the multifunctionality of farms, to identify the household
dealings with agriculture and to represent their income structure
divided between agricultural and non-agricultural components. In the
third section data available in Italy and information used in the paper
are presented. After that, main structural characteristics of Italian
farms, caught by the 2000 Agricultural Census, are examined. Next, the
estimations of main farms' economic results and performance by a 2000
sample survey are discussed. Finally, analysis results on the
sub-population of households dealing with agriculture are discussed
through a comparison between multifunctional and monofunctional farms.
In this context, data on income structure are analysed with a special
attention to off-farm sources.

**2. The multifunctionality of farms**

The concept of multifunctionality was introduced to highlight a peculiar
character of agriculture and farms in nowadays economy. Beyond their
primary function of producing food and raw materials, farms perform
other collective functions: they contribute to food safety and to
socio-economic viability in many rural areas; they bring environmental
benefits such as soil conservation, sustainable resource management and
biodiversity conservation. These functions, which are called "non-market
functions", are increasingly in demand for sustainable development
policies at the national and the international level, in developed as
well as in developing countries.

The relevance of these functions depends on the externality effects
potentially generated by the production activity of farmers and it
depends on the type of agriculture, on the dimension of farms, on the
local environmental and socio-economic conditions, on the cultural
weight that agriculture has in the history of a geographical area. There
are several positive externalities of farms' activity, but also some
negative ones with respect to the previous conditions.

Besides, the multifunctionality of farms can be connected with some
market activities different from the typical ones of agricultural
production and breeding, such as tourist activities, processing of
agricultural products, aquaculture or landscape's maintenance.

As a first approximation to measure multifunctionality, some of the
mentioned market activities are considered in our analysis. The data on
multiactivity of farms are combined with their structural dimensions in
order to study the profitability of Italian farms and so to assess the
economic sustainability of agriculture.

**3. Households and incomes**

Several kinds of management are possible for farms. A typical one is a
farm conducted by an holder with some degree of his work and of his
family components. Following the EU definition in agricultural
statistics, this is the case of the so called "direct management farm".

In our study, Italian farms with this form of management are considered
to analyse their income structure and the weight of agricultural
activity on it. An household involved in agricultural production can
receive income from a combination of sources: strictly agricultural
activity, connected activities in the farm and off-farm incomes. In this
perspective, income from the "core" agricultural production could be
just one component of households total income. Agricultural activity is
only one of the possible sources of employment (full- or part-time) for
households components. These phenomena can be relevant in rural areas
close to urban settlements or in local areas with manufacturing or
services activities.

**4. Data available in Italy and the RICA-REA project**

To study the connection between multifunctionality of farms and
households income structure several sources of data are today available
in the Italian NIS (Istat). Beside the data produced by the 2000
Agricultural Census, statistical information are available from the
current sample structural surveys: the European Farms Structural Survey
(FSS), based on a random sample of 55000 farms, updates Census
information every two years. In addition, the Business Survey on
Agriculture (RICA-REA project) produces yearly estimations on the
economic results of farms from a random sample of 17.000 units.
Beginning with reference year 2002, the latter incorporates the European
FADN **(**Farm Accounting Data Network**)**. The statistical information
obtained from the Census or from the FSS on one side and from the
Business Survey on Agriculture on the other side can be integrated at
farm level in a comprehensive database, with a record linkage through
the farms statistical identification code. The data used in this work
come from the last Census and the Business Survey on Agriculture, both
referring to year 2000.

The 2000 edition of the Business Survey was carried out on a random
sample selected from a list not updated with Census data. Furthermore
the questionnaire didn't include any information on the physical and the
production structure of the farms. For these reasons the integration
between the Business Survey and the Census has been carried out in two
steps.

In the first step, variables collected by the surveys have been joined
at micro level (record linkage). About 90% of the farms observed by
Business Survey linked with Census. Furthermore it should be stressed
that the distributions of the main structural variables estimated on the
linked units didn't differ significantly from the distributions
resulting from the Census data.

In the second step, an integration at macro level has been carried out.
In fact the sample weights of the Business Survey have been calibrated
with respect to main results of the Census.

Starting with the reference year 2003 only the second level of
integration between FSS and Business Survey will be necessary. In fact,
starting by to this year, the first edition of the new Business survey
has been carried out (RICA-REA Project). This is a random sample survey
designed to satisfy both FADN and ESA '95 regulations. The
characteristics of this survey can be summarised as follow:

\- small farms are included in the population;

\- units are selected using a stratified random sample design;

\- data are collected using FADN methodology on bigger farms and using a
short questionnaire for small farms;

\- main structural variables are observed on each unit as well as
economic variables to comply with National Accounts needs.

**5.The structure of the Italian agriculture sector**

The weight of Italian agriculture on national economy is very limited
(Table 1), mainly as a direct consequence of the development of
industrial and services sectors.

***Table 1 -- Main agricultural aggregates on Italian economy and on
EU15 agriculture - year 2000 (percentage composition)***

  ------------------------------------------------------------------------
  **Agricultural Aggregates**                **On Italian  **On EU 15
                                             Economy**     Agriculture**
  ------------------------------------------ ------------- ---------------
  **Production of agricultural branch at     4,5           15,0
  basic prices.**                                          

  **Oil**                                    \-            39,9

  **Gross Value Added at basic prices**      3,2           19,6

  **Labour cost**                            1,3           24,1

  **Total Annual Work Units (AWU)**          5,1           19,3

  **AWU of Employees**                       2,8           27,0
  ------------------------------------------------------------------------

Source: Istat -- National Accounts; Eurostat

In terms of production at basic prices the agricultural sector is equal
to 4.5% of the Italian economy and its weight reduces to 3.2% when the
gross value added is considered. The weight doesn't change much for
employment (5.1% of total annual work units). Nevertheless, Italy
represents a relevant share of the European agriculture and this is
particularly evident in terms of employees and labour cost. The Italian
agricultural production represent 15.0% of the European Union one (EU
15). In terms of value added the Italian weight is 19.6%; a similar
figure is shown in terms of total Annual Work Units (AWU). In some
respects the relevance of the Italian agriculture, especially in terms
of employment, is the result of the kind of Italian cultivations,
similar to those of others Mediterranean countries, but also a
consequence of some specific structural characteristics of Italian
farms.

In Italy there is a large number of small farms (Table 2); 80% of farms
has less than 5 hectares of Agricultural Area Utilised (AAU) but employ
a small quantity of inputs. As a result 79.9% of AAU is concentrated on
farms with more than 5 hectares of AAU; they grow 87.5% of cattle and
79.7% of pigs.

#### *Table 2 -- D*istribution of structural variables (inputs) by classes of AAU

+----------+-------+-------+-------+---------+-------+--------------+
| *        | **%** | **%** | **%** | **%**   | **%** | **%**        |
| *Classes |       |       |       |         |       |              |
| of AAU** | **Fa  | **    | **    | **C     | **P   | **Annual     |
|          | rms** | AAU** | ESU** | attle** | igs** | Working      |
| **(hec   |       |       |       |         |       | Days**       |
| tares)** |       |       |       |         |       |              |
+==========+=======+=======+=======+=========+=======+==============+
| \<= 1    | 40.25 | 3.65  | 6.85  | 0.95    | 7.30  | 22.25        |
+----------+-------+-------+-------+---------+-------+--------------+
| 1-5      | 40.05 | 16.65 | 21.45 | 11.45   | 14.80 | 34.90        |
+----------+-------+-------+-------+---------+-------+--------------+
| 5-15     | 13.05 | 20.35 | 22.30 | 26.35   | 12.80 | 21.75        |
+----------+-------+-------+-------+---------+-------+--------------+
| 15-50    | 5.00  | 23.35 | 23.00 | 31.45   | 42.70 | 12.55        |
+----------+-------+-------+-------+---------+-------+--------------+
| \>50     | 1.65  | 36.00 | 26.40 | 29.80   | 22.40 | 8.55         |
+----------+-------+-------+-------+---------+-------+--------------+
| ** **    | **100 | **100 | **100 | **1     | **100 | **100.00**   |
|          | .00** | .00** | .00** | 00.00** | .00** |              |
+----------+-------+-------+-------+---------+-------+--------------+

Source: Istat -- Agricultural Census

To the other end, annual working days have a different distribution as a
result of increasing labour productivity with respect to the farms'
dimension in AAU terms. In the first two classes of AAU is concentrated
57% of annual working days with respect to just 20% of AAU. In the next
three classes 43% of the annual working days correspond to 80% of AAU.

If the results of the Business Survey on Agriculture are considered, it
is possible to analyse some characteristics of outputs distribution
among the classes of AAU (Table 3).

## Table 3 -- Distribution of structural variables (outputs) by classes of AAU

+------------+-------------+---------+--------------+-----------------+
| **Classes  | **%**       | **%**   | **%**        | **%**           |
| of AAU**   |             |         |              |                 |
|            | **P         | **Rev   | **Value      | **Gross         |
| **(h       | roduction** | enues** | Added**      | Operative       |
| ectares)** |             |         |              | Margin (GOM)**  |
+============+=============+=========+==============+=================+
| \<= 1(\*)  | 13.20       | 12.65   | 15.75        | 16.35           |
+------------+-------------+---------+--------------+-----------------+
| 1-5        | 22.00       | 21.60   | 21.85        | 23.15           |
+------------+-------------+---------+--------------+-----------------+
| 5-15       | 19.90       | 20.10   | 21.60        | 23.40           |
+------------+-------------+---------+--------------+-----------------+
| 15-50      | 21.15       | 21.20   | 18.85        | 19.55           |
+------------+-------------+---------+--------------+-----------------+
| \>50       | 23.75       | 24.45   | 21.95        | 17.55           |
+------------+-------------+---------+--------------+-----------------+
|            | **100.00**  | **1     | **100.00**   | **100.00**      |
|            |             | 00.00** |              |                 |
+------------+-------------+---------+--------------+-----------------+

Source: Istat --Business Survey on Farms, Agricultural Census

*(\*)About 20% of the results in the first row are due to farms
specialised in animal breeding.*

Particularly evident is the weight of small farms in Italian
agriculture. Those with less than 5 hectares have 35% of production,
with just 20% of total AAU and a lower share of cattle. Their weight
reduces in terms of revenues, due to a greater portion of production
consumed by the holders and their families, but increases in terms of
value added and Gross Operative Margin (GOM), due to a lower burden of
intermediate and labour costs. In brief, small farms use a combination
of inputs different with respect to large farms and they substitute
family work to other inputs. Moreover there is a suggestion that small
farms are specialised on intensive cultivation and are often dedicated
to high value added products.

The large number of small farms with a relevant share of the national
agricultural production, suggests to investigate the average values of
main economic variables by classes of AAU (Table 4).

## Table 4 -- Average structural variables by classes of AAU (Euro)

+-----------+--------+--------+--------+-------+--------+-----------+
| **Classes | **     | **     | **Reve | **    | *      | **Self**  |
| of AAU**  | Annual | Produc | nues** | Value | *Gross |           |
|           | W      | tion** |        | Ad    | Ope    | **cons    |
| **(he     | orking |        |        | ded** | rative | umption** |
| ctares)** | Days** |        |        |       | Margin |           |
|           |        |        |        |       | (      |           |
|           |        |        |        |       | GOM)** |           |
+===========+========+========+========+=======+========+===========+
| Italy     | 189.45 | 14     | 13     | 76    | 6      | 518.55    |
|           |        | 881.85 | 704.95 | 84.20 | 406.35 |           |
+-----------+--------+--------+--------+-------+--------+-----------+
| \<= 1     | 104.80 | 4      | 4      | 30    | 2      | 456.95    |
|           |        | 889.65 | 311.15 | 06.25 | 598.45 |           |
+-----------+--------+--------+--------+-------+--------+-----------+
| 1-5       | 165.05 | 8      | 7      | 41    | 3      | 524.90    |
|           |        | 170.00 | 392.15 | 93.15 | 706.50 |           |
+-----------+--------+--------+--------+-------+--------+-----------+
| 5-15      | 315.35 | 22     | 21     | 127   | 11     | 632.90    |
|           |        | 660.70 | 091.75 | 06.40 | 486.45 |           |
+-----------+--------+--------+--------+-------+--------+-----------+
| 15-50     | 476.70 | 63     | 58     | 290   | 25     | 587.70    |
|           |        | 080.60 | 237.45 | 53.35 | 086.80 |           |
+-----------+--------+--------+--------+-------+--------+-----------+
| \>50      | 979.65 | 213    | 202    | 1018  | 67     | 752.50    |
|           |        | 619.45 | 378.30 | 75.40 | 933.75 |           |
+-----------+--------+--------+--------+-------+--------+-----------+

Source: Istat --Business Survey on Farms, Agricultural Census

In relationship to small farms with less than 5 hectares, the average
annual working days indicates that less than an Annual Working Unit (AWU
equal to 280 annual working days) can be employed with low average gross
incomes (GOM). Only from 5 to 15 hectares class, farms can employ at
least an AWU with an average gross income of 11486 euro.

On the other end in small farms a significant part of the agricultural
production is consumed and it contributes to the holder and his family
support. However, in absolute value, the support to disposable income
from self-consumption is rather weak, even if it represents an average
increase of 21% of GOM for farms up to 1 hectares of AAU and an increase
of 16.5% for farms between 1 to 5 hectares of AAU.

Finally, it is evident that average gross income by working day in small
farms is much lower with respect to larger ones: from 24,8 Euro of GOM
by working day in farms up to 1 hectares, to 36,4 Euro in farms from 5
to 15 hectares and 69,3 Euro in farms over 50 hectares.

In order to exemplify a micro economic analysis, for each respondent
unit the economic indicators per hectare and per working day have been
computed. Tables 5 and 6 contain, for each AAU class, the median of
these indicators. Median has been preferred to the mean because of its
robustness and as a consequence of the observed skewness of the
distribution of the indicators in each class.

Table 5 shows a decreasing efficiency in the use of AAU factor: more
than 50% of first class units have a production greater than 2000 Euro
per hectare while in the last class the median of the production per
hectare is 843 Euro. The opposite relationship is observed for the
labour factor (Table 6): the value of production by worked day increases
fast from the median units in first class to those in the last one.

In fact in the first class more than 50% of the units have to use more
than 120 day per hectare while the median of this indicator is 7,75 in
the last class.

## Table 5 --Economic indicators in AAU terms by classes of AAU (Median values)

+-----------------+---------+-----------+--------+--------+-----------+
| **Classes of    | *       | **Pro     | **Reve | *      | **Gross   |
| AAU**           | *Annual | duction** | nues** | *Value | Operating |
|                 | Working |           |        | A      | Margin    |
| **(hectares)**  | Days**  |           |        | dded** | (GOM)**   |
+=================+=========+===========+========+========+===========+
| Italy           | 58.25   | 1340.85   | 793.10 | 586.55 | 509.30    |
+-----------------+---------+-----------+--------+--------+-----------+
| \<= 1           | 123.35  | 2107.05   | 608.85 | 844.40 | 841.00    |
+-----------------+---------+-----------+--------+--------+-----------+
| 1-5             | 46.90   | 1125.05   | 849.25 | 415.05 | 400.65    |
+-----------------+---------+-----------+--------+--------+-----------+
| 5-15            | 33.05   | 1147.45   | 802.15 | 509.30 | 443.45    |
+-----------------+---------+-----------+--------+--------+-----------+
| 15-50           | 15.30   | 1131.15   | 1      | 479.05 | 420.35    |
|                 |         |           | 002.85 |        |           |
+-----------------+---------+-----------+--------+--------+-----------+
| \>50            | 7.75    | 842.45    | 783.45 | 332.90 | 258.10    |
+-----------------+---------+-----------+--------+--------+-----------+

Source: Istat --Business Survey on Farms, Agricultural Census

## Table 6 - Economic indicators in AWU terms by classes of AAU (Median values)

+------------------+-------------+-------------+-----------+---------+
| **Classes of     | *           | **Revenues  | **Value   | **GOM   |
| AAU**            | *Production | by worked   | added by  | by      |
|                  | by worked   | day**       | worked    | worked  |
| **(hectares)**   | day**       |             | day**     | day**   |
+==================+=============+=============+===========+=========+
| Italy            | 25.88       | 18.11       | 11.76     | 10.35   |
+------------------+-------------+-------------+-----------+---------+
| \<= 1            | 17.85       | 6.47        | 8.12      | 7.39    |
+------------------+-------------+-------------+-----------+---------+
| 1-5              | 28.09       | 20.70       | 11.64     | 10.95   |
+------------------+-------------+-------------+-----------+---------+
| 5-15             | 40.71       | 34.42       | 18.52     | 16.72   |
+------------------+-------------+-------------+-----------+---------+
| 15-50            | 78.36       | 71.12       | 34.15     | 30.36   |
+------------------+-------------+-------------+-----------+---------+
| \>50             | 107.70      | 104.09      | 44.87     | 36.63   |
+------------------+-------------+-------------+-----------+---------+

Source: Istat --Business Survey on Farms, Agricultural Census

**6. Multifunctionality and households income**

To assess the impact of farm's multifunctionality on households income,
it is useful to split all Italian farms in two clusters. First of all,
farms with a direct management by an holder and family work are
considered. This is the most diffuse typology of farms and it
corresponds to 92.2% of total farms counted in 2000 Census (Table 7).
The percentage is very high (more than 91%) in all the classes of AAU
and it declines only in the last one with more than 50 hectares of AAU
by farm (76.1%).

## Table 7 --Distributions of Households and multifunctional farms by classes of AAU (%)

+------------------------+------------+--------------+---------------+
| **Classes of AAU**     | **Multi    | **           | **Households  |
|                        | functional | Households** | managing      |
| **(hectares)**         | Farms**    |              | mu            |
|                        |            |              | ltifunctional |
|                        |            |              | farms**       |
+========================+============+==============+===============+
| Italy                  | 9.25       | 92.25        | 9.48          |
+------------------------+------------+--------------+---------------+
| \<= 1                  | 5.15       | 92.95        | 5.45          |
+------------------------+------------+--------------+---------------+
| 1-5                    | 8.65       | 92.30        | 8.92          |
+------------------------+------------+--------------+---------------+
| 5-15                   | 18.20      | 92.30        | 18.27         |
+------------------------+------------+--------------+---------------+
| 15-50                  | 19.55      | 91.35        | 20.10         |
+------------------------+------------+--------------+---------------+
| \>50                   | 25.10      | 76.15        | 24.79         |
+------------------------+------------+--------------+---------------+

Source: Istat --Business Survey on Farms, Agricultural Census

A second group of farms has been extracted from the total population as
the subset of units carrying out multifunctional activities.

In practical terms, a farm has been considered as "multifunctional" if
at least one of the following revenues is positive:

-   Selling of transformed agricultural products (animals and vegetable
    products);

-   Agritourism;

-   Wages from labour supply to other farms;

-   Revenues from acquaculture;

-   Revenues from landscape maintenance;

-   Revenues from other activities connected to agriculture-

In Italy, 9.25% of farms fit this definition of multifunctionality.
Notwithstanding, the share of multifunctional farms increases with
classes of AAU: from 5.15% in small farms, to 25.10% in larger ones.
Among the households (farms with a direct management by an holder and
with family work) the share of multifunctional farms is 9.48% and the
distribution by classes of AAU is close to the previous one.

It is now possible to compare the performance of the two groups of
households (managing multifunctional or monofunctional farms) in terms
of economic indicators from the Business Survey on Agriculture (Table
8).

## Table 8 -- Ratios between median values of multifunctional farms over monofunctional ones, belonging to households 

+-----------+---------+--------+-------------+---------+-------------+
| **Classes | **(Pro  | **(Re  | **(Value    | **(GOM  | **(Annual   |
| of AAU**  | duction | venues | added of    | of      | Working     |
|           | of      | of     | mul         | multi-f | days of     |
| **(he     | multi-f | mu     | ti-farms)** | arms)** | mul         |
| ctares)** | arms)** | lti-fa |             |         | ti-farms)** |
|           |         | rms)** | **/**       | **/**   |             |
|           | **/**   |        |             |         | **/**       |
|           |         | **/**  | **(Value    | **(GOM  |             |
|           | **(Pro  |        | added of    | of      | **(Annual   |
|           | duction | **(Re  | mo          | mono-f  | Working     |
|           | of      | venues | no-farms)** | arms)** | days of     |
|           | mono-f  | of     |             |         | mo          |
|           | arms)** | m      |             |         | no-farms)** |
|           |         | ono-fa |             |         |             |
|           |         | rms)** |             |         |             |
+===========+=========+========+=============+=========+=============+
| \<= 1     | 1.20    | 1.45   | 1.40        | 1.20    | 1.60        |
+-----------+---------+--------+-------------+---------+-------------+
| 1-5       | 3.05    | 3.50   | 5.95        | 3.95    | 2.40        |
+-----------+---------+--------+-------------+---------+-------------+
| 5-15      | 1.15    | 1.25   | 1.60        | 1.75    | 1.45        |
+-----------+---------+--------+-------------+---------+-------------+
| 15-50     | 1.45    | 1.45   | 1.40        | 1.40    | 1.30        |
+-----------+---------+--------+-------------+---------+-------------+
| \>50      | 1.25    | 1.05   | 1.70        | 1.40    | 1.00        |
+-----------+---------+--------+-------------+---------+-------------+

Source: Istat --Business Survey on Farms, Agricultural Census

In all classes of AAU multifunctional farms have better performance with
respect to monofunctional ones in terms of median production, revenues,
value added and gross operating margin. The difference is particularly
high for the class of farms from 1 to 5 hectares of AAU, where the
economic performances of the first group are three times the
performances of the second one. For any class of AAU the improvements of
multifunctional farms are particularly high with respect to value added
and gross operating margin. This is because the secondary activities in
multifunctional farms increase revenues more than intermediate and
labour costs. At the same time multifunctionality has a positive effect
on employment, acting as a multiplier of the labour demand, especially
in small classes of AAU. This is particularly important for households
managing farms of small dimension in order to compensate the limited
average number of worked days to be used in agricultural production.

A further important information comes from the Business Survey on
Agriculture: it regards data on off-farm incomes of the households
components (Table 9).

***Table 9 -- Households with off-farm incomes by sources and classes of
AAU***

+--------+---------+--------+-----+-------+-------+---------+-------+
| **C    | **Hou   | *      | **W | **    | *     | *       | **GOM |
| lasses | seholds | *Mixed | age | Pensi | *Inte | *Family | by    |
| of     | with    | in     | s** | ons** | rests | com     | f     |
| AAU**  | o       | come** |     |       | and   | ponents | amily |
|        | ff-farm |        |     |       | prof  | working | comp  |
| **     | incomes |        |     |       | its** | in the  | onent |
| (hecta | (%)**   |        |     |       |       | farm    | wo    |
| res)** |         |        |     |       |       | (n°)**  | rking |
|        |         |        |     |       |       |         | in    |
|        |         |        |     |       |       |         | the   |
|        |         |        |     |       |       |         | farm  |
|        |         |        |     |       |       |         | (eu   |
|        |         |        |     |       |       |         | ro)** |
+========+=========+========+=====+=======+=======+=========+=======+
| Italy  | 79.75   | 12.75  | 28  | 54.25 | 1.80  | 2.85    | 22    |
|        |         |        | .00 |       |       |         | 47,84 |
+--------+---------+--------+-----+-------+-------+---------+-------+
| \<= 1  | 88.95   | 12.75  | 29  | 61.45 | 1.00  | 2.68    | 9     |
|        |         |        | .70 |       |       |         | 69,57 |
+--------+---------+--------+-----+-------+-------+---------+-------+
| 1-5    | 80.50   | 14.05  | 29  | 54.30 | 2.05  | 2.79    | 13    |
|        |         |        | .75 |       |       |         | 28,49 |
+--------+---------+--------+-----+-------+-------+---------+-------+
| 5-15   | 62.90   | 10.15  | 23  | 41.70 | 3.40  | 3.19    | 36    |
|        |         |        | .15 |       |       |         | 00,76 |
+--------+---------+--------+-----+-------+-------+---------+-------+
| 15-50  | 51.45   | 10.40  | 16  | 33.55 | 2.15  | 3.53    | 71    |
|        |         |        | .75 |       |       |         | 06,74 |
+--------+---------+--------+-----+-------+-------+---------+-------+
| \>50   | 44.80   | 8.05   | 11  | 33.30 | 2.40  | 3.96    | 171   |
|        |         |        | .45 |       |       |         | 54,99 |
+--------+---------+--------+-----+-------+-------+---------+-------+

Source: Istat --Business Survey on Farms, Agricultural Census

In Italy, slightly less than 80% of households involved in agricultural
production receives off-farm incomes. This percentage increases to
nearly 90% in the class of small farms with no more than 1 hectare of
AAU, and reduces progressively in larger farms till 45% in those with
more than 50 hectares. It is evident too that the pensions are the most
frequent and highest source of off-farm incomes. This is in relationship
with the share of holders over the retirement age established in Italy
by the social security system for old-age benefits.

The relevance of off-farm incomes for Italian households involved in
agriculture becomes more evident if the number of family components
working in the farm and per-capita GOM are considered. The average
number of family components is 2.85 and is high to small farms too (less
than 5 AAU). These figures have to be evaluated in relationship to the
small number of worked days in small farms and much less than 1 AWU
(Table 4). It follows that in small Italian farms there is a division of
working days among household components. Per-capita income can be very
low too: per-capita annual GOM is less than 1000 Euro in farms up to 1
hectare of AAU and slightly more than 1300 Euro in farms between 1 and 5
hectares. Here is the reason for Italian households involved in
agriculture to integrate the farms income with off-farm ones.

In this respect multifunctional activities in the farm play a central
role for the income structure of households (Table 10).

Table 10 -- Percentage composition of incomes of households managing a
mono- or a multi-functional farm by classes of AAU

+--------+---------+-----------+-------+-----+-------+--------+------+
| **C    | **Agric | **Multif  | **    | **W | **    | **Int  | *    |
| lasses | ultural | unctional | Mixed | age | Pensi | erests | *Tot |
| of     | act     | a         | inc   | s** | ons** | and    | al** |
| AAU**  | ivity** | ctivity** | ome** |     |       | pro    |      |
|        |         |           |       |     |       | fits** |      |
| **     |         |           |       |     |       |        |      |
| (hecta |         |           |       |     |       |        |      |
| res)** |         |           |       |     |       |        |      |
+========+=========+===========+=======+=====+=======+========+======+
| Hous   |         |           |       |     |       |        |      |
| eholds |         |           |       |     |       |        |      |
| with   |         |           |       |     |       |        |      |
| mo     |         |           |       |     |       |        |      |
| nofunc |         |           |       |     |       |        |      |
| tional |         |           |       |     |       |        |      |
| farms  |         |           |       |     |       |        |      |
+--------+---------+-----------+-------+-----+-------+--------+------+
| Italy  | 45,66   | 0,00      | 7,96  | 20  | 25,13 | 0,59   | 10   |
|        |         |           |       | ,66 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| \<= 1  | 21,40   | 0,00      | 9,60  | 30  | 38,18 | 0,67   | 10   |
|        |         |           |       | ,15 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 1-5    | 32,52   | 0,00      | 11,47 | 25  | 29,59 | 0,60   | 10   |
|        |         |           |       | ,81 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 5-15   | 68,12   | 0,00      | 4,58  | 12  | 14,15 | 0,66   | 10   |
|        |         |           |       | ,49 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 15-50  | 88,15   | 0,00      | 2,24  | 3   | 5,83  | 0,38   | 10   |
|        |         |           |       | ,40 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| \>50   | 94,57   | 0,00      | 0,76  | 1   | 3,13  | 0,31   | 10   |
|        |         |           |       | ,22 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| Hous   |         |           |       |     |       |        |      |
| eholds |         |           |       |     |       |        |      |
| with   |         |           |       |     |       |        |      |
| mul    |         |           |       |     |       |        |      |
| tifunc |         |           |       |     |       |        |      |
| tional |         |           |       |     |       |        |      |
| farms  |         |           |       |     |       |        |      |
+--------+---------+-----------+-------+-----+-------+--------+------+
| Italy  | 45,65   | 30,66     | 2,63  | 9   | 11,09 | 0,77   | 10   |
|        |         |           |       | ,19 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| \<= 1  | 12,34   | 13,10     | 3,52  | 24  | 46,56 | 0,21   | 10   |
|        |         |           |       | ,29 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 1-5    | 25,51   | 43,43     | 3,43  | 13  | 12,52 | 1,35   | 10   |
|        |         |           |       | ,75 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 5-15   | 57,19   | 24,43     | 1,72  | 8   | 7,33  | 1,16   | 10   |
|        |         |           |       | ,16 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| 15-50  | 54,80   | 35,45     | 3,24  | 3   | 3,12  | 0,32   | 10   |
|        |         |           |       | ,07 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+
| \>50   | 74,15   | 21,57     | 1,00  | 1   | 2,04  | 0,12   | 10   |
|        |         |           |       | ,12 |       |        | 0,00 |
+--------+---------+-----------+-------+-----+-------+--------+------+

Source: Istat --Business Survey on Farms, Agricultural Census

Income from the agricultural activity covers the same share (45.6%) in
both groups of households. At the aggregate level, it seems to be a
substitution effect of all off-farm sources of income with income from
multifunctional activities. But at a disaggregate level, there is a much
lower percentage of income coming from the agricultural activity for
households with multifunctional farms with respect to the other group of
households. A first possible conclusion should be that incomes from
multifunctional activities to one side integrate income from the
agricultural activity and to the other side substitute off-farm incomes.
The relative intensity of these effects depends on the farm's dimension:

\- in households with small farms (up to 1 hectare) the integration
effect on the agricultural activity income is stronger than the
substitution effect to off-farm incomes; the share of multifunctional
incomes (13.1%) is equivalent to that of agricultural income (12.3%),
and the share of off-farm incomes (74.6%) is similar to that observed
among households with monofunctional farms (78.6%);

-in households with medium dimension farms (1 to 5 hectares)
multifunctional incomes cover a share much higher (43.3%) than other
sources of income and substitute off-farm ones; besides, the share
observed for the latter (31.0%) is less than half with respect to the
same sources in monofunctional farms (78.6%);

\- in households with farms over 15 hectares of AAU integration effect
of income to the agricultural activity is stronger than the substitution
effect of off-farm incomes; actually, in households with multifunctional
farms incomes from the agricultural activity cover higher shares than
those coming from other sources of income and, at the same time, the
shares observed from the off-farm incomes are only slightly less than
the same ones observed for households with monofunctional
farms**[.]{.underline}**

**Conclusions**

From an economic point of view the main results of the present work are
the following:

\- multifunctional activities have a low level of diffusion among
Italian farms; among those managed by households the diffusion is
slightly higher and increases with the dimension in term AAU;

\- among farms managed by households, at each class of AAU,
multifunctional ones have a better performance than monofunctional ones
in terms of value added and gross operating margin (GOM); this is
because the secondary activities on multifunctional farms increase
revenues more than intermediate and labour costs;

\- improvements in the performance of multifunctional farms are more
relevant in relationship to small farms (from 1 to 5 hectares of AAU)
managed by households; furthermore multifunctionality has a
multiplicative effect on working days of the holder and his family
components;

\- in households with farms up to 15 hectares of AAU, the agricultural
income integration by off-farm incomes his relevant and spread;

\- multifunctional activities of farms allows the households a further
integration of their agricultural income and to substitute off-farm
sources too;

\- nevertheless, the relative effect of the two phenomena is different
among classes of AAU: the integration effect of the agricultural income
is stronger for households managing small farms; the substitution effect
of off-farm incomes is higher in households managing farms in the
intermediate classes of AAU; these are the farms where the economic
results from multifunctionality have been higher.

An overall evaluation of multifunctionality effects on farms performance
and on households income is too early. Anyway, from the analysis of
Italian case becomes evident that multifunctionality, in our definition,
is a way to improve the economic conditions of households dealing with
agriculture and to reach an economic sustainability in the agricultural
sector. Nevertheless the operational definition of multifunctionality
applied in this work considers only market-activity connected to
agricultural production. In any case the economic evaluation of
multifunctionality can't be without consideration of the externality
effects of agricultural activities. In this direction the official
statistics has to work more to produce appropriate definitions and
measurement methods of social costs-and social benefits connected to
agriculture activities.

From a statistical point of view the analysis carried out in this paper
suggests that the integration between a Business Survey and a structural
one is a suitable tool, at least in the European context, for micro and
macro analysis applied to agriculture. Nevertheless, some conditions
have to be satisfied in order to reach a reliable and useful data base
without a significant increase of the response burden for agricultural
holders:

\- business surveys should include farms without a relevant agriculture
production but important for rural development monitoring;

\- business surveys should be carried out on a random sample to avoid
significant bias due to voluntary sample designs;

\- business and structural surveys should be coherent with respect to
the definitions of statistical units and common structural variables
used to obtain consistent estimates;

\- in the case of non overlapping samples, the business survey must
collect a minimum set of structural variables useful to calibration of
the structural survey results and for microeconomic analysis.

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