Assessing the Impacts of Pillar 1 and 2 Subsidies on TFP in French Crop Farms

This article analyses the impact of common agricultural policy (CAP) subsidies on total factor productivity using a FADN dataset of French crop farms between 1996 and 2003. We first estimate a production function using a system GMM approach and then recover farm‐level total factor productivity (TFP). Further, the impact of Pillar 1 and 2 subsidies on TFP is investigated and results show that several subsidies have a negative impact on productivity during the period covered in the dataset. CAP reforms have also had an impact on the relationship between subsidies and productivity.     

Impact of CAP Subsidies on Technical Efficiency of Crop Farms in Germany,the Netherlands and Sweden

This paper analyses the impacts of CAP reforms, particularly subsidies on technical efficiency of crop farms. An output distance function is employed and estimated together with an inefficiency effects model to capture the effects of CAP subsidies and farmer characteristics on farm efficiency. The model is applied to FADN data (period 1995–2004) of crop farms in Germany, the Netherlands and Sweden. The study shows that the 10‐year average technical efficiency is 64% in Germany, 76% in the Netherlands and 71% in Sweden. The average annual changes in technical efficiency are 0.1%, 0.4% and 2.3%, respectively. The share of crop subsidies in total subsidies has a negative impact on technical efficiency in Germany but a positive impact in Sweden, although insignificant in the Netherlands. The share of total subsidies in total farm revenues has negative impacts on technical efficiency in all three countries, consistent with income and insurance effects. Positive (negative) change in technical efficiency is mainly attributable to farm size (degree of specialisation) in Germany, and degree of specialisation (degree of subsidy dependence) in the Netherlands and Sweden.     

Subsidies and agricultural productivity in the EU

This paper investigates the relationship between EU agricultural subsidies and agricultural labor productivity growth by estimating a conditional convergence growth model. We use more representative subsidy indicators and a wider coverage (panel data from 213 EU regions over the period 2004–2014) than have been used before. We find that, on average, EU's Common Agricultural Policy (CAP) subsidies increase agricultural labor productivity growth, but this aggregate effect hides important heterogeneity of effects of different types of subsidies. The positive effect on productivity comes from decoupled subsidies, that is, Pillar I decoupled payments and some Pillar II payments. Coupled Pillar I subsidies have the opposite effect: they slow down productivity growth.     

Challenging Small‐Scale Farming: A Non‐Parametric Analysis of the (Inverse) Relationship Between Farm Productivity and Farm Size in Burundi

We use a non‐parametric approach to investigate the (inverse) relationship between farm productivity and farm size. A kernel regression is used on data of mixed cropping systems to study the determinants of production including different factors that have been identified in literature as missing variables in the testing of the inverse relationship such as soil quality, location and household heterogeneity. Household data on farm activities and crop production were gathered from 640 households in 2007 in two Northern provinces of Burundi. Our results do not reject the findings of an inverse relationship between farm size and productivity. However, we find that size returns vary substantially with farm size, that is, between 0.2 for the smallest farms and 0.8 for the largest farms. Other factors that significantly affect production include soil quality. Finally, we find a significant positive association between food security and farm size.     

Relationships between Technical Efficiency and Financial Management for Czech Republic Farms

This paper provides the first analysis of the relationship between farm financial structure and technical efficiency in Central and Eastern European farming during the transition to a market economy. First, technical efficiency scores for a sample of Czech farms are computed with data envelopment analysis, accounting for sampling variability by using the Simar and Wilson bootstrapping procedure. The confidence intervals show that corporate livestock farms are the most homogenous in terms of technical efficiency. Second, a Tobit model is applied for the investigation of factors, including financial considerations, which influence the variation in technical efficiency. The potential endogeneity of the financial variables in the explanation of efficiency is examined, following Smith and Blundell. The Amemiya estimator is used for those cases which are revealed as endogenous. The analysis indicates substantial differences in the way in which the different management structures are treated by lenders. De novo, individual farms are subject to stringent evaluation of their loan applications, which is not the case for the successors of the former collective and state farms.     

Fertiliser Subsidies and Smallholder Commercial Fertiliser Purchases: Crowding Out,Leakage and Policy Implications for Zambia

Fertiliser intended for government subsidy programmes is sometimes diverted and sold to farmers at or near market prices. Failure to account for such ‘leakage’ can upwardly bias econometric estimates of the effect of government fertiliser subsidy programmes on total fertiliser use. This paper extends the framework used in earlier studies on the crowding in/crowding out effects of subsidised fertiliser on commercial fertiliser purchases to account for leakage, and then applies it to the case of Zambia. Results suggest that each additional kg of subsidised fertiliser injected into the system increases total fertiliser use by 0.54 kg. Without controlling for leakage, the estimate would have been 0.87, an overestimate of 61%.     

Productivity and Producer Welfare in the Presence of Production Risk

Production risk is an inherent characteristic of agriculture and changes in production risk will affect the welfare of risk‐averse producers. Using standard concepts from the literature on uncertainty, we introduce a welfare measure which comprises total factor productivity (TFP), production risk and farmer risk preferences, and which reflects the impact on producer welfare of changes in production technology. An empirical application is carried out using data from a sample of Spanish dairy farms which shows how the positive impact of increases in TFP on welfare can be offset by increases in the risk premium (‘cost of risk’) to the point where welfare may decrease.     

Demand for rural tourism: the effects of quality and information

The development of rural tourism is regarded as a promising diversification strategy especially for lagging and mountainous areas of the European Union. Research concerning the demand and/or supply of rural tourism services has been limited within the agricultural economics domain despite the significance attached to rural tourism by various rural development policy measures and initiatives. The article examines the expenditure behavior of rural tourists within a framework of demand for composite (heterogeneous) goods. The proposed framework captures the quality of the tourism experience as the commodity's unit value, a quantifiable economic variable, examines its effects on expenditures and allows for the estimation of elasticity in prices regarding expenditure and quantity. Empirical analysis is facilitated by a survey recording the expenditure behavior of 465 tourists in two rural and lagging areas of Greece. The quality of the tourism experience is significantly and positively affected by the income, the source from which information about the trip is retrieved (Internet, newspapers as well as general press and special travel press) and by the amount of information sought by the consumer prior to the trip. In turn, the quality of the tourism experience is the major endogenous factor that positively influences expenditures for rural tourism. Further research is needed before evidence provided in this work can be used to draw policy conclusions and recommendations.     

The Effect of Investment,LFA and Agri-environmental Subsidies on the Components of Total Factor Productivity: The Case of Slovenian Farms

The effect of subsidies on the performance of farms has received a great deal of attention in the literature, although results are inconclusive. Furthermore, much of the related literature examines the effect of subsidies only on technical efficiency (TE). We examine the effect of different types of subsidies on the different components of total factor productivity (TFP) in Slovenian agriculture over the period 2006–2013. We first estimate a Random Parameter Stochastic production frontier model. Then, based on the estimates of this model, we calculate and decompose the TFP index into TE, scale efficiency and technological change. Third, we apply combined difference-in-difference and a matching estimator to examine the effect of investment, less favoured area (LFA) and agri-environmental (AE) subsidies on the different components of TFP. In our case, these subsidies are found to have no significant effect on either TFP or on its components.     

EU Policies on Bioenergy and their Potential Clash with the WTO

The paper outlines EU policy on bioenergy, including biofuels, in the context of its policy initiatives to promote renewable energy to combat greenhouse gas emissions and climate change. The EU’s Member States are responsible for implementing EU policy: thus, the UK’s Renewables Obligation on electricity suppliers and its Renewable Transport Fuel Obligation and road‐fuel tax rebates are examined. It is unlikely that EU policy is in conflict with the WTO Agreement on Agriculture or that on Subsidies and Countervailing Measures, but its provisions on environmental sustainability criteria could be problematic.     

Farmer-to-farmer technology diffusion and yield variation among adopters: the case of improved cowpea in northern Nigeria

This article examines the magnitude and sources of yield variation among adopters of improved cowpea varieties in northern Nigeria promoted through farmer‐to‐farmer diffusion. The results reveal important efficiency differences between the lead farmers who have contacts with breeders and the follower farmers who get technology and information from the lead farmers. Differential adoption of the package of seed, insecticide, fertilizer, and recommended cereal‐cowpea cropping pattern provides much of the explanation for yield variation among adopters. The component often missing, and hence accounting for much of the yield variation, is the crop management technology relating to the cereal‐cowpea cropping pattern. No efficiency variation is attributed to the source of technology and information, such as whether improved cowpea was obtained from breeders or lead farmers. Technology source has a rather indirect influence on efficiency through its effect on package adoption where breeders promote greater package adoption among the lead farmers than the lead farmers do among the follower farmers. Possible ways of disseminating crop management technological information through the farmer‐to‐farmer technology diffusion are recommended to better exploit the yield and profitability potentials of improved cowpea varieties in northern Nigeria.     

Adoption of Multiple Sustainable Agricultural Practices in Rural Ethiopia

The adoption and diffusion of sustainable agricultural practices (SAPs) has become an important issue in the development‐policy agenda for sub‐Saharan Africa, especially as a way to tackle land degradation, low agricultural productivity and poverty. However, the adoption rates of SAPs remain below expected levels. This study analyses the factors that facilitate or impede the probability and level of adoption of interrelated SAPs, using recent data from multiple plot‐level observations in rural Ethiopia. Multivariate and ordered probit models are applied to the modelling of adoption decisions by farm households facing multiple SAPs, which can be adopted in various combinations. The results show that there is a significant correlation between SAPs, suggesting that adoptions of SAPs are interrelated. The analysis further shows that both the probability and the extent of adoption of SAPs are influenced by many factors: a household’s trust in government support, credit constraints, spouse education, rainfall and plot‐level disturbances, household wealth, social capital and networks, labour availability, plot and market access. These results imply that policy‐makers and development practitioners should seek to strengthen local institutions and service providers, maintain or increase household asset bases and establish and strengthen social protection schemes in order to improve the adoption of SAPs.     

Specialization,diversification, and productivity: a panel data analysis of rice farms in Korea

This article examines the microeconomics of productivity associated with specialization/diversification in production activities, with an application to Korean rice farms. Korean rice farms tend to be very small and highly specialized. Our analysis examines the productivity effects associated with both farm size and farm specialization/diversification in Korean agriculture. Relying on farm‐level panel data, the analysis studies farm productivity in a multi‐input multi‐output context, accounting not only for changes in inputs and technical change in rice production, but also for the role of diversification in the production of other crops in current and previous periods. We find positive but small productivity gains from farm diversification. These gains come mostly from complementarity effects across farm outputs, with minimal effect of scale economies. The positive complementarity effects work against nonconvexity effects, which provide strong productivity incentives for rice farms to specialize.     

Outsourcing and efficiency: the case of Spanish citrus farming

Outsourcing in agriculture has traditionally been seen as a managerial strategy of smaller farms to achieve higher levels of efficiency. In this article, we provide empirical evidence supporting the existence of a positive relationship between outsourcing and efficiency in Spanish citrus farming. Outsourcing is measured by the proportion of outsourced labor and capital in farms' total use of these production factors, i.e., the higher the proportion of outsourced inputs, the higher the degree of outsourcing. Making use of data envelopment analysis techniques, we compute input‐specific reductions required to achieve technical efficiency at the farm level. Our results show that attainment of technical efficiency leads to a reduction in the use of both farms' own and outsourced production factors. Furthermore, the degree of outsourcing increases as farms move to their technically efficient productive plans. In addition, outsourcing labor and capital allows farms to achieve efficiency regardless of their size. In our view, this result has a clear implication for policy makers. Instead of trying to improve Spanish citrus farms' competitiveness by pursuing an increase of their average size, policy measures should be adopted to enhance farmers' managerial skills and the efficiency of those external service firms and co‐operatives that are effectively performing basic cultivation tasks.     

Productivity and Environmental Performance in Marketing Cooperatives: An Analysis of the Spanish Horticultural Sector

The paper analyses the productivity of marketing cooperatives incorporating environmental inputs/outputs. In the European agriculture, expectations for attaining sustainable and competitive agriculture rely to a great extent on the cooperative sector's ability to adapt to new market conditions. These challenges have led marketing cooperatives in the fruit and vegetables sector to consider improvements in productivity and sound environmental performance. The study analyses the total factor productivity related to environmental variables in this sector using a parametric‐stochastic approach and panel data on Spanish cooperatives over the period 1994–2002. Additionally, the determinants of environmental productivity are examined econometrically. The estimates obtained show an increase in efficiency for the period under study and a relationship between productivity changes and management factors, such as labour quality, capital intensity and environmental spillover.     

EU‐wide Economic and Environmental Impacts of CAP Greening with High Spatial and Farm‐type Detail

In this paper we analyse the economic and environmental impacts of CAP greening introduced by the 2013 CAP reform using the CAPRI model. CAPRI captures the farm heterogeneity across the EU and it allows to depict the implementation of the greening measures in high detail while integrating the environmental effects and the market feedback of the simulated policy changes. The simulated results reveal that the economic impacts (land use, production, price and income) of CAP greening are rather small, although some farm types, crops (fallow land and pulses) and Member States may be affected more significantly. The CAP greening will lead simultaneously to a small increase in prices and a small decrease in production. Farm income slightly increases because the price effects offset the production decline. Similarly to economic effects, the environmental impacts (GHG emissions, N surplus, ammonia emissions, soil erosion, and biodiversity‐friendly farming practices) of CAP greening are small, although some regions may see greater effects than others. In general, the environmental effects at EU level are positive on a per hectare basis, but the increase in UAA can reverse the sign for total impacts. Overall, simulated GHG and ammonia emissions decrease in the EU, while the total N surplus, soil erosion and biodiversity‐friendly farming practices indicator slightly increase due to the CAP greening.     

The Impact of Direct Income Transfers of CAP on Greek Olive Farms’ Performance: Using a Non‐Monotonic Inefficiency Effects Model

We analyse the impacts of direct income transfers on the technical efficiency of Greek olive farms. We use a production frontier function and a non‐monotonic inefficiency effects model, which incorporates the influences of exogenous variables (subsidies, farm characteristics, etc.) on technical efficiency. The model is applied to 1995–2004 FADN data. The results show that direct transfers of the CAP had a negative and monotonic effect on technical efficiency, whereas the degree of specialisation had a non‐monotonic effect on technical efficiency.     

The impact of agricultural policy on farm income concentration: the case of regional implementation of the CAP direct payments in Italy

One of the objectives of agricultural policy worldwide concerns the support of farm income. Common Agricultural Policy direct payments (DPs) are the main instruments to support farm income in the European Union. This article addresses their role in the concentration of farm income. This is done by calculating the Gini coefficient and its disaggregation in a large sample of Italian farms in the period between 2006 and 2007. Although this approach has been used to develop ex‐post analysis in previous studies, this article is innovative given that it is used here in an ex ante analysis aimed at evaluating the likely impact of a recent reform proposal. This latter requests changing the current model to a regional model of DPs application to make payment rates (i.e., payment per hectare) homogeneous among farms in the same region. The analysis shows that DPs and farm incomes are both very concentrated but that DPs allow for an income concentration reduction in Italian farms. The shift to a regional implementation reduces DPs concentration and, to a limited extent, farm income concentration. Of the considered regionalization scenarios, those that redistribute DPs among regions are the most effective in reducing concentration. The extension of the Gini considered approach to an ex ante setting seems effective because it provides insights that could feed the policy debate regarding the forthcoming reform.     

The Role of Risk Mitigation in Production Efficiency: A Case Study of Potato Cultivation in the Bolivian Andes

Using a stochastic production frontier to model potato production in Bolivia, we quantify the costs of environmental and activity diversification (AD) in the form of efficiency losses and yield forgone. We find that efficiency decreases with the number of fields in a geographical cluster, distance between the dwelling and a particular field, discontinuity between fields, and off‐farm income. However, environmental diversification (ED) is more detrimental than AD. Using spatial analysis of field and household efficiency measures, we assess production vulnerability to climatic shocks and the potential of ED in mitigating shocks. We find important spatial clusters of low and high efficiencies at the field level suggesting that climatic shocks influence efficiency measures. Household‐level efficiency measures exhibit random spatial patterns suggesting that on average households can mitigate the adverse effects of shocks through ED.