What kinds of subsidies affect technical efficiency? The case of Italian dairy farms

Abstract

The relationship between subsidies and the technical efficiency of farms has important policy implications. The impact on efficiency can depend on the type of grant. Here, three macrocategories of subsidy are distinguished. With reference to a large sample of Italian dairy farms, the macrocategory of rural development payments is further broken down according to the main types of subsidy received. A stochastic frontier analysis based on the Farm Accountancy Data Network reveals a heterogeneous influence of these categories. Subsidies coupled with production are associated with greater efficiency. Decoupled grants have a negative influence on efficiency when pursuing agri-environmental policy objectives, and no impact on efficiency when supporting the income of farms or promoting the transfer of knowledge and competitiveness. [EconLit Citations: C13, Q12].