The importance of subsidies in Azorean dairy farms' efficiency

Abstract

The purpose of this chapter is to analyze the importance of subsidies in the Azorean dairy farms efficiency from 1997 to 1999. The technical and economic variables of 82 dairy farms of the FADN (Farm Accountancy Data Network) were analyzed over the period of 3 years. The DEA (data envelopment analysis) was the approach used to calculate the efficiency. The software used was the DEAP (Data Envelopment Analysis Program). The results show that the subsidies were not so important in the dairy farms' efficiency within 3 years. The technical efficiency variable and constant returns do not present great differences between model I (with subsidies as the output) and model II (without subsidies as the output). The number of efficient dairy farms was quite different, and the decreasing subsidies seem be compensated by the dairy production increase.