CAP Subsidies and Productivity of the EU Farms

Authors

  • Marian Rizov,

  • Jan Pokrivcak,

  • Pavel Ciaian

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    • Marian Rizov is at the Middlesex University Business School, London. Jan Pokrivcak is at the Slovak University of Agriculture, Nitra. Pavel Ciaian is with the Joint Research Centre at the European Commission. E-mail: pavel.ciaian@ec.europa.eu for correspondence. The authors acknowledge financial support from the European Commission FP7 project “Comparative Analysis of Factor Markets for Agriculture across the Member States.” The authors thank the Microeconomic Analysis Unit L.3 of the European Commission for granting access to the farm-level FADN data. Thanks are also due to Paolo Sckokai and Mario Veneziani for useful comments on the data and variables, the reviewers and Editor, David Harvey, for constructive comments on an earlier draft. The views expressed in the paper are purely those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission.

Abstract

The paper investigates the impact of the Common Agricultural Policy (CAP) subsidies on farm total factor productivity (TFP) in the European Union (EU). We employ a structural semi-parametric estimation algorithm directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using the Farm Accountancy Data Network (FADN) samples for the EU-15 countries. Our main findings are clear: subsidies impact negatively on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity is more nuanced and in several countries it turned positive.

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