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Abstract
The major objective of this paper is to examine the association between
agricultural subsidies and farm efficiency using data from the European Farm Accountancy
Data Network (FADN) for operations specializing on dairy. The analysis covers the 18 year
period going from 1990 to 2007 and includes the following seven countries: Denmark;
France; Germany; Ireland; Spain; the Netherlands; and the United Kingdom. Separate
translog stochastic input distance frontiers are estimated for each country. The key results
show high average technical efficiency (TE) ranging from 91.8% to 94.9%, average rates of
technological change going from -0.6% to 1.4%, and increasing returns to scale (1.24 to 1.44)
across all seven countries. In addition, higher subsidy and hired labor dependence are found
to be significantly associated with higher technical inefficiency across all seven countries.
Moreover, the latest Common Agricultural Policy (CAP) regime introducing fully decoupled
payments has reduced TE in all countries considered except Denmark.