CAP Subsidies and the Productivity of EU Farms

Author(s): 
Marian Rizov, Jan Pokrivcak and Pavel Ciaian
Date of publication: 
Wed, 03/27/2013
Contributing institution(s):

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.

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