Abstract
This chapter analyses the impact of subsidy payments on farm productivity and efficiency. More knowledge about how farm productivity and efficiency are affected by subsidies could help policy makers introduce better targeted agricultural policies. In almost all studies, subsidies are treated as exogenous. This chapter examines how subsidy payments influence farm productivity and technical efficiency when subsidies are treated as an endogenous variable in productivity and inefficiency models. The study is based on an unbalanced panel data from Norwegian grain farms during 1991–2006. Results show that subsidies negatively affected farm productivity but had a positive influence on technical efficiency.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Battese, G.E., Coelli, T.J. (1988), A stochastic frontier production function incorporating a model for technical inefficiency effects: A comparative study of wheat farmers in Pakistan, Journal of Econometrics 38: 387–399.
Bezlepkina, I.V., Oude Lansink, A. (2006), Impact of debts and subsidies on agricultural production: farm-data evidence, Quarterly Journal of International Agriculture 45: 7–34.
Diewert, W.E. (1992), Fisher ideal output, input, and productivity indexes revisited, Journal of Productivity Analysis 3: 211–248.
Emvalomatis, G., Oude Lansink, A., Stefanou, S.E. (2008), An Examination of the Relationship Between Subsidies on Production and Technical Efficiency in Agriculture: The Case of Cotton Producers in Greece. Paper Presentation at ‘Modeling Agricultural and Rural Development Policies’, 107th European Association of Agricultural Economists (EAAE) Seminar, Sevilla, Spain, January 29th – February 1st, 2008.
Giannakas, K., Schoney, R., Tzouvelekas, V. (2001), Technical efficiency, technological change and output growth of wheat farms in Saskatchewan, Canadian Journal of Agricultural Economics 49: 135–152.
Guan, Z., Oude Lansink, A. (2006), The source of productivity growth in Dutch agriculture; A perspective from finance, American Journal of Agricultural Economics 88: 644–656.
Hadley, D. (2006), Patterns in technical efficiency and technical change at the farm-level in England and Wales, 1982–2002, Journal of Agricultural Economics 57: 81–100.
Heshmati, S., Kumbhakar, S.C. (1997), Estimation of technical efficiency in Swedish crop farms: A pseudo panel data approach, Journal of Agricultural Economics 48: 22–37.
Just, R.E. (2000), Some guiding principles for empirical production research in agriculture, Agricultural and Resource Economics Review 29: 138–158.
Just, R.E., Pope, R.D. (2002), The agricultural producer: Theory and statistical measurement, In B.L. Gardner, G.C. Rausser (eds.), Handbook of Agricultural Economics, Elsevier-North-Holland, Amsterdam.
Karagiannis, G., Sarris, A. (2005), Measuring and explaining scale efficiency with the parametric approach: The case of Greek tobacco growers, Agricultural Economics 33: 441–451.
Kleinhabss, W., Murillo, C., Juan, C.S., Sperlich, S. (2007), Efficiency, subsidies, and environmental adaptation of animal farming under CAP, Agricultural Economics 36: 49–65.
Koesling, M., Ebbesvik, M., Lien, G., Flaten, O., Valle, P.S., Arntzen, H. (2004), Risk and risk management in organic and conventional cash crop farming in Norway, Food Economics 1: 195–206.
Kumbhakar, S.C., Lovell, C.A.K. (2000), Stochastic Frontier Analysis, Cambridge University Press, New York, NY.
Kumbhakar, S.C., Wang, H.-J. (2005), Estimation of growth convergence using a stochastic production frontier approach, Economics Letters 88: 300–305.
McCloud, N., Kumbhakar, S.C. (2008), Do subsidies drive productivity? A cross-country analysis of Nordic dairy farms, In S. Chib, W. Griffiths, G. Koop and D. Terrell (eds), Advances in Econometrics: Bayesian Econometrics, 23, pp. 245–274, Emerald Group Publishing.
Nilf. (2007), Norwegian Agriculture – Status and Trends 2007, Norwegian Agricultural Economics Research Institute (NILF), Oslo, Norway.
OECD. (2007), Agricultural Policies in OECD Countries: Monitoring and Evaluation 2007, Annual Reports, Organisation for Economic Co-operation and Development, Paris.
Piesse, J., Thirtle, C. (2000), A stochastic frontier approach to firm level efficiency, technological change and productivity during the early transition in Hungary, Journal of Comparative Economics 28: 473–501.
Prestegard, S. (2004), Multifunctional agriculture, policy measures and the WTO, the Norwegian case, Food Economics 1: 151–162.
Sipiläinen, T., Kumbhakar, S.C. (2008), Effects of Direct Payments on Farm Performance: The Case of Dairy Farms in Northern EU Countries. Paper presented at ‘The Economic Impact of Public Support to Agriculture’, II AIEA2-USDA International Meeting, at the Department of Statistics, University of Bologna, Bologna, Italy, June 19th – 21st, 2008.
Skuras, D., Tsekouras, K., Dimara, E., Tzelepis, D. (2006), The effects of regional capital subsidies on productivity growth: A case study of the Greek food and beverage manufacturing industry, Journal of Regional Science 46: 355–381.
Wilson, P., Hadley, D., Ramsden, S., Kaltas, I. (1998), Measuring and explaining technical efficiency in UK potato production, Journal of Agricultural Economics 49: 294–305.
Wilson, P., Hadley, D., Asby, C. (2001), The influence of management characteristics on the technical efficiency of wheat farmers in eastern England, Agricultural Economics 24: 329–338.
Zhu, X., Oude Lansink, A. (2008), Technical Efficiency of the Crop Farms Under the Various CAP Reforms: Empirical Studies of Germany, the Netherlands and Sweden. Paper Presentation at ‘Modeling Agricultural and Rural Development Policies’, 107th European Association of Agricultural Economists (EAAE) Seminar, Sevilla, Spain, January 29th – February 1st, 2008.
Acknowledgment
Comments from Agnar Hegrenes on an earlier version of the chapter are gratefully acknowledged. The Research Council of Norway provided financial support for this study.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2010 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Kumbhakar, S.C., Lien, G. (2010). Impact of Subsidies on Farm Productivity and Efficiency. In: Ball, V., Fanfani, R., Gutierrez, L. (eds) The Economic Impact of Public Support to Agriculture. Studies in Productivity and Efficiency, vol 7. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-6385-7_6
Download citation
DOI: https://doi.org/10.1007/978-1-4419-6385-7_6
Published:
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4419-6384-0
Online ISBN: 978-1-4419-6385-7
eBook Packages: Business and EconomicsEconomics and Finance (R0)