Subsidy effects on productivity and technical efficiency of corporate dairy farms in the Russian Federation

The impact of state subsidies on Russia's post-Soviet dairy output remains controversial; this study provides an empirical analysis of that relationship. Using an unbalanced panel dataset of 123 dairy enterprises in the Leningrad Region spanning the period from 2010 to 2023, we employ stochastic frontier analysis to assess these relationships. The results indicate that subsidies have a positive effect on dairy enterprise productivity, while their impact on technical efficiency cannot be clearly identified. Notably, the positive effect of subsidies is confined to a medium range of subsidy levels. The influence of different types of subsidies on productivity is multidirectional, as plant production and investment interest subsidies are associated with productivity gains, whereas breeding subsidies have a negative effect, and other subsidy types show no significant impact. Although our results suggest that milk production in Russia could be further increased through improvements in technical efficiency, the findings also indicate that distributing subsidies to a larger number of enterprises is more effective than allocating large subsidies to a limited number of recipients. Furthermore, the results suggest that dairy subsidy policy should be adjusted in favor of more decoupled and regionally differentiated subsidies at the district level.