Review of Direct Payments for Less-Favoured Areas: Evidence from Japan

Abstract

Ministry of Agriculture, Forestry, and Fishery (MAFF) in Japan launched direct payment for hilly and mountainous areas considered as less-favored areas in 2000 with aim of preventing further farmland abandonment in the areas, compensating the farmers working in such disadvantaged regions for their costly production, and enhance agricultural multi-functionality through community cooperation. This review examines the effect of direct payments on continuous land use, prevention of farmland, agrarian structural change, environmental dimension, and income inequality through both quantitative and qualitative methods. Also, I connected the empirical results to theoretical economics using simple profit functions.