Subsidies and technical efficiency in agriculture: evidence from European dairy farms

Laure Latruffe (1) , Boris E. Bravo-Ureta (2) , Alain Carpentier (1) , Yann Desjeux (1) , Victor H. Moreira (3)

1 SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires
2 Department of Agricultural and Resource Economics
3 Universidad Austral de Chile

The objective of this article is to examine the association between agricultural subsidies and dairy farm technical efficiency in the European Union, and in so doing we make novel contributions to the literature. We include in the analysis nine diverse western European Union (EU) countries over an 18-year period (1990–2007) encompassing the various Common Agricultural Policy (CAP) reforms enacted since the inception of the EU. Further, we account for input endogeneity using an original method of moments estimator. Our results show that the effect of subsidies on technical efficiency may be positive, null, or negative, depending on the country. The analysis reveals that the introduction of decoupling with the 2003 CAP reform weakens the effect that subsidies have on technical efficiency.

Mots clés: Dairy production; Endogeneity; European union; Technical efficiency; Stochastic production frontier; Subsidies; Milk production

Mots clés: Production laitière; Subvention; Efficacité technique; Frontière stochastique de production; Union européenne

Domaines: Sciences du Vivant [q-bio]

Laure Latruffe, Boris E. Bravo-Ureta, Alain Carpentier, Yann Desjeux, Victor H. Moreira. Subsidies and technical efficiency in agriculture: evidence from European dairy farms. American Journal of Agricultural Economics, 2016, 99 (3), pp.783-799. ⟨10.1093/ajae/aaw077⟩. ⟨hal-01462772⟩