Exploring the Relationship Between Farm Productivity and CAP Subsidies for the NMS

The paper studies the impact of the Common Agricultural Policy (CAP) subsidies on farm productivity using the Farm Accountancy Data Network (FADN) samples for the New Member States (NMS). We employ multilevel mixed-effects models, with fixed and random effects included to represent heterogeneity in the data and the the importance of the group effects (country and region). We estimate models for different sizes of farms (small, medium and large) in the case of some New Member States (NMS). We find that size matters mainly in terms of effect size and less in terms of its sign for subsidies, assets, land and liabilities in most countries. We found that subsidies have a negative impact on agricultural productivity in almost all countries (in Bulgaria it turned positive for small and medium-sized farms). The effect of other variables on productivity is more nuanced (for land is positive in most countries). Our findings could be of use in the evaluation of EU policies on subsidies and in a better design of future policies towards an improvement of the food productive capacity of the EU agricultural sector.