Common Agricultural Policy support, technical efficiency and productivity change in French agriculture

Abstract

This paper investigates how the various changes in the policy supporting agriculture in the European Union, i.e. the Common Agricultural Policy (CAP), and various types of subsidies (investment, production and rural development) affected the technical efficiency and productivity change of farms in France between 1990 and 2006. Three types of farming—field crop, dairy and beef cattle—are considered. Comparison of efficiency across periods indicates a significant reduction in efficiency in the period following the first CAP reform (1992 MacSharry reform) but an improvement in efficiency change. Econometric results related to the effect of subsidies on efficiency scores (with fixed effect models) and productivity change indices (with ordinary least squares) give ambiguous findings. The effect of a particular type of subsidy was found to be negative or positive depending on the sample’s production orientation and on the performance considered. Several methodological recommendations are drawn from the analysis for future research.