Impact of the rural development programme subsidies on the farms’ inefficiency and efficiency

Abstract

Teaim of the paper is to assess the impact of subsidies from the Rural Development Programme of the Czech Republic for the years 2007–2013 (RDP) on the technical ineffi ciency and the effi ciency of Czech agricultural holdings. An unbalanced panel includes 454 Czech farms and 2103 observations for years 2007–2013. T e Parametric Stochastic Frontier Analysis is used to assess the technical ineffi ciency and effi ciency. A “true” fi xed effects model with RDP subsidies explaining the variance of the ineffi ciency term is estimated. T e results are ambiguous. On one hand, the RDP subsidies contributed to the decrease of variance of the ineffi ciency term, but on the other, the effect is statistically signifi cant only at 90% level of signifi cance. T erefore, we further tested the medians of ineffi ciency (effi ciency) which are lower (higher) in the subsidized farms. We concluded that there are statistically signifi cant diff erences depending on whether the farm received the RDP subsidies or not. However, we suggest a further examination of the particular projects using the effi ciency of investments indicators.