Analyzing the Impact of Subsidies on Beef Production Efficiency in Selected European Union Countries. A Stochastic Metafrontier Approach

Abstract

The European Union Common Agricultural Policy reforms since the early 2000s allowed for the implementation of different types of agricultural subsidies, such as direct support in the form of decoupled and coupled payments, or agri‐environmental payments. As a result, there are significant differences in agricultural subsidies granted in each member state of the European Union. However, there is limited cross‐country comparative empirical evidence regarding the effects of the implementation of different levels and types of subsidies on farm efficiency. Using farm level data for beef farms in Ireland, France, Great Britain, and Germany between 2005 and 2012, we implement the stochastic metafrontier proposed by Huang et al. (2014) and attempt to correct for endogeneity applying the method in Shee and Stefanou (2015). Using these approaches, we contribute to the literature by consistently comparing cross‐country farm performance, as well as exploring the disaggregated effects of different types of subsidies on farm level technical efficiency and on the technology gaps. Our estimates show that although beef farms included operate on average close to the global frontier, there is scope to improve farm level managerial performance. However, they do operate close to the global frontier, although not on it. We also find evidence that implementing full decoupling benefited efficiency, whereas implementing partial decoupling might have hindered technical efficiency improvements for beef farms, as well as technology catch up.

Performance of Nigerian Rice Farms from 2010 to 2019: A Stochastic Metafrontier Approach

“…Inefficiency is then estimated relative to the group-specific frontier, and the difference in technology frontiers across groups is viewed as the technology gap [25,41]. Metafrontier production analysis has been widely used in similar studies [22,34,40,[42][43][44].…”

Regional technical efficiency rankings and their determinants in the Irish dairy industry: A stochastic meta‐frontier analysis

“…Nonetheless, in addition to the dairy sector studies that have already been mentioned, other recent studies examined the Irish beef sector using SFA. For example, Martinez Cillero et al (2019) and Cillero et al (2021) applied the SFA approach which provided a flexible representation of the production technology in the Irish beef sector, due to its advantages over the DEA, which took into account the purpose of their studies, that is, to evaluate farm performance and estimate inefficiency drivers. Therefore, previous research is useful for setting prior determination of a production function.…”

“…Alem et al (2019) and Alem (2022) applied this approach and a similar approach is followed in this study. The trans‐log (TL) and Cobb–Douglas (CD) functions are adapted and estimated from previous empirical models in the literature, that is, Huang et al (2014), Jiang and Sharp (2015), Alem et al (2019), and Cillero et al (2021).…”

“…However, while we have used meta‐frontier approach here, which the literature noted above concludes assists in addressing the endogeneity issues which are inherent in SFA models, it is acknowledged by the authors that there are multiple issues where endogeneity can persist in SFA models. As noted by Cillero et al (2021) this approach should give an idea of the potential endogeneity bias in the estimates obtained using the standard stochastic meta‐frontier approach and future research could look at how this bias can be solved for meta‐frontiers using unbalanced panel data.…”

“…To determine the region with the most productive technology the MTR is used. The MTE allows regions to be compared based on how closely their farms operate relative to the meta‐frontier (Cillero et al, 2021). The national model is based on the aggregated data for all regions.…”