CAP Subsidies and the Productivity of EU Farms

This paper investigates the impact of subsidies from the common agricultural policy on the total factor productivity of farms in the 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 samples from the Farm Accountancy Data Network for EU-15 countries. Our main findings are clear: subsidies had a negative impact on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity was more nuanced, as in several countries it turned positive.

Keywords: CAP subsidies, productivity, EU farms, farming, CAP, Farm Accountancy Data Network

Suggested Citation: Suggested Citation

Rizov, Marian and Pokrivcak, Jan and Ciaian, Pavel, CAP Subsidies and the Productivity of EU Farms (March 26, 2013). Factor Markets Working Paper No. 37, March 2013, Available at SSRN: https://ssrn.com/abstract=2275273