At a time when policy-makers in many developed countries continue to justify farm support on the basis of relatively low and unstable incomes, this chapter shows that incomes of farm households are not particularly lower on average compared to those of non-farm households in most of the ten selected OECD member countries. What is however striking is that income disparity and poverty are greater in the farm community compared to the non-farm community in most of the selected countries. This analysis questions therefore the continuation of indiscriminate farm income support. It also calls for the need of collecting farm household data that would allow a more effective targeting of farm support and for revising fundamentally public interventions towards the agricultural sector.

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We propose unit root tests for panel data with a small number of time periods, T , and increments that follow an AR(1) process under the null. The model is a fixed-effect panel version of the augmented Dickey-Fuller regression of order 1. Individual-specific linear trends may also be included. The test statistics are t-type statistics based on leastsquares estimates from which the Nickell bias is removed. Their limiting distributions (for an increasing number of independent cross-section units, N , and fixed T ) are standard normal. Our test generalizes the panel unit root test of Harris and Tzavalis, which is based on an unaugmented Dickey-Fuller regression. As an illustration, we examine whether the Law of One Price holds in the European car market since the start of stage three of the EMU in 1999. We find strong evidence of price convergence in the EMU countries. Journal The Econometrics we find K 11 = tr(C L MLC C L MLC) = tr(D L MLD D L MLD) + tr(rb L MLbr rb L Mbr ) = tr(D L MLD D L MLD) + r (4) * (b L MLb) 2 ,where r (4) * ≡ lim T 0 →−∞ (r r) (r r) = (1 − ρ 4 ) −1 . Similar calculations givetr (C L MS C L MS) = tr (D L MF D L MF ), K 55 = tr (D MF D MF ), K 14 = tr (D L MLD D L MF ), K 15 = tr (D L MLD D MF ), K 24 = tr (D MLD D L MF ), K 25 = tr (D MLD D MF ), K 34 = tr (D MD D L MF ), K 35 = tr (D MD D MF ), K 45 = tr (D L MF D MF ) and J 11 = 2tr (L MLA) 2 , J 22 = tr MLA(ML + L M)A, J 33 = 2tr (MA) 2 , J 44 = tr (L MF D ) 2 + tr (L MLA), J 55 = tr (MF D ) 2 + tr (MA), J 12 = tr L MLA(ML + L M)A, J 13 = 2tr L MLAMA, J 14 = 2tr L MLAL MF D , J 15 = 2tr L MLAMF D , J 23 = 2tr MLAMA, J 24 = tr (ML + L M)AL MF D , J 25 = tr (ML + L M)AMF D , J 34 = 2tr MAL MF D , J 35 = 2tr MAMF D , J 45 = tr L (MF D ) 2 + tr L MA.