Effects of redistributing policy support on farmers’ technical efficiency

Abstract

The objective of this article is twofold: first, investigating the relationship between technical efficiency and decoupled direct payments of a sample of Italian farms prior to the application of the 2014–2020 Common Agricultural Policy reform; second, evaluating possible implications of alternative scenarios about distribution of direct payments on technical efficiency. To these aims, a stochastic frontier analysis is adopted. Results indicate that direct payments produce significant effects on technical efficiency in specialized farms, which received higher levels of support. However, effects are contrasting. Moreover, results show that redistribution of policy subsidies may negatively impact on technical efficiency to an extent depending upon the criterion of redistribution applied. Finally, some policy suggestions are given.

Sustainable Economic Development of Farms in Central and Eastern European Countries Driven by Pro-investment Mechanisms of the Common Agricultural Policy

“…The diverse impacts are also confirmed in studies by Bonfiglio [40], who found that the effect of subsidies on the farms' technical efficiency can differ in terms of the function of factors, including their type of farming. Despite these highly interesting findings, the authors point to certain imperfections in their studies.…”

“…First of all, there are some reservations as to the analysis period, which was only one year. The authors believe that a longer time perspective could yield more reliable findings [40]. Therefore, unlike their research project, the analysis presented in this paper covers a broader time frame (12 years) and a larger territory (eight countries).…”

“…The metrics of efficiency include technical efficiency-a concept which means that an enterprise should seek to maximize output under the assumption that a defined level of input is available [39]. As shown by a literature review, that aspect was addressed by several researchers who endeavored to determine the relationship between agricultural subsidies and technical efficiency; however, they ended up with contrasting findings [40]. For instance, in their meta-analysis comprising 70 different studies spanning over a period of circa 30 years, Minviel and Latruffe [41] demonstrated that agricultural subsidies had a significant negative impact on the farms' technical efficiency.…”

Estimating the Impact of Decoupled Payments on Farm Production in Northern Ireland: An Instrumental Variable Fixed Effect Approach

“…There are a few empirical studies that have examined this subject. Using Italian farms as a case study, Bonfiglio et al [47] examined the effects of decoupled payments on technical efficiency. The study found that direct payments still exert a significant impact on farms' ability in converting inputs to outputs.…”

Governmental Regulation and Support of Agro-Industrial Complex: Situation, Problems, Prospects

“…The development of the processes of Russia's integration into the global world economy justifies the need to establish an effective mechanism for state regulation of both agricultural production and foreign economic activity in the agricultural sector at the national and regional level, based on the innovative component and aimed, on the one hand, to realize Russian national interests and food security of the country, and on the other hand, for the quick and effective integration of Russia into the global agricultural and food market [8].Whether Russia will actively export surplus of the agricultural products or, on the contrary, import products that it can not or does not want to produce domestically; whether it will be an active participant in the market of finished food products, semi-finished products, raw materials or means of production,it will not be able to do without competition and interaction with foreign partners and rivals [3,9].And the effectiveness of such interaction, in turn, requires recognition of the need for state regulation and support of the agroindustrial complex, study of the foreign experience of such support and selection of the most effective and suitable examples for Russian practice, their reasonable adaptation and careful perception, as well as the monitoring the effectiveness of the application and adjustment of the measures as needed.…”