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Technical efficiency and productivity differentials of dairy farms in three EU countries: the role of CAP subsidies

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  • Zhu, Xueqin
  • Milán Demeter, Róbert

Abstract

The impact of EU agricultural support policies on farms’ economic performance is an interesting issue for policy makers. The objective of this paper is to investigate technical efficiency and technical efficiency change of specialized German, Dutch and Swedish dairy farms and to compare their relative productivity. Three subsidy-related variables are introduced to reflect the wealth and insurance effect and the coupling effect of Common Agricultural Policy (CAP) subsidies. Our results imply that a higher degree of coupling in farm support negatively affects farm efficiency, and the motivation of farmers to work efficiently is lower when they depend to a higher degree on subsidies as a source of income. Our study indicates that the composition of subsidies has a much smaller effect on efficiency than does the composition of total farm income. Relative productivity scores show that German and Swedish dairy farms have potential for improvement in productivity, compared to the production technology in the etherlands. In conclusion, it is questionable whether farm income support of CAP since the 1992 CAP reform is suitable to achieve its goal to increase farmers’ overall competitiveness by improving their efficiency.

Suggested Citation

  • Zhu, Xueqin & Milán Demeter, Róbert, 2012. "Technical efficiency and productivity differentials of dairy farms in three EU countries: the role of CAP subsidies," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 13(1), pages 1-27.
  • Handle: RePEc:ags:aergaa:253496
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    File URL: http://ageconsearch.umn.edu/record/253496/files/13_1_5.pdf
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    Cited by:

    1. Embaye, Weldensie T. & Bergtold, Jason S., 2017. "Effect of Crop Insurance Subsidy on Total Farm Productivity of Kansas Farms, US," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258107, Agricultural and Applied Economics Association.
    2. repec:eee:ejores:v:271:y:2018:i:1:p:250-261 is not listed on IDEAS
    3. Cillero, Maria Martinez & Breen, James & Thorne, Fiona & Wallace, Michael, 2017. "The effect of the implementation of the 2003 Mid-Term Review of the CAP on technical efficiency of beef production. A comparative analysis," 91st Annual Conference, April 24-26, 2017, Royal Dublin Society, Dublin, Ireland 258617, Agricultural Economics Society.
    4. repec:ags:frrfes:277882 is not listed on IDEAS
    5. repec:spr:agfoec:v:5:y:2017:i:1:d:10.1186_s40100-017-0085-x is not listed on IDEAS
    6. Marusca De Castris & Daniele Di Gennaro, 2018. "Does agricultural subsidies foster Italian southern farms? A Spatial Quantile Regression Approach," Papers 1803.05659, arXiv.org.
    7. repec:oup:erevae:v:45:y:2018:i:1:p:3-25. is not listed on IDEAS
    8. repec:ags:jlaare:276503 is not listed on IDEAS
    9. repec:psc:journl:v:9:y:2017:i:3:p:243-273 is not listed on IDEAS
    10. Marian Rizov & Jan Pokrivcak & Pavel Ciaian, 2013. "CAP Subsidies and Productivity of the EU Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(3), pages 537-557, September.
    11. Dudu, Hasan & Smeets Kristkova, Zuzana, 2017. "Impact of CAP Pillar II Payments on Agricultural Productivity," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261171, European Association of Agricultural Economists.

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