The objective of this article is to examine the association between agricultural subsidies and dairy farm technical efficiency in the European Union, and in so doing we make novel contributions to the literature. We include in the analysis nine diverse western European Union (EU) countries over an 18‐year period (1990–2007) encompassing the various Common Agricultural Policy (CAP) reforms enacted since the inception of the EU. Further, we account for input endogeneity using an original method of moments estimator. Our results show that the effect of subsidies on technical efficiency may be positive, null, or negative, depending on the country. The analysis reveals that the introduction of decoupling with the 2003 CAP reform weakens the effect that subsidies have on technical efficiency.
Policy reform of the CAP and society's expectations of agriculture have resulted in a growing need for improved information on the effectiveness of policy in achieving high-level objectives for more sustainable practice in agriculture. This is a high priority given its importance for consumers, public policy and private industry. Data collection programmes will need to adapt their scope if their information is to adequately address new information needs about high-level objectives. Assessment of sustainability at the farm level is hindered by the lack of data with which to derive appropriate, meaningful, and relevant indicators. This is particularly problematic for assessment of agricultural sustainability across the European Union (EU). Various databases exist at the EU scale regarding agricultural data sources and we identify one of these, the EU Farm Accountancy Data Network (FADN), as having considerable potential to assess farm-level sustainability at EU level. We critique several examples of published work that has attempted to assess agricultural sustainability using: FADN data alone; FADN data in combination with data from supplementary surveys, and; FADN data in combination with data from other EU databases. We conclude that the FADN would need to broaden its scope of data collection if it is to address the new information needs of policy, and we discuss the challenges in expanding FADN with a view towards wider farm-level assessment of sustainability. These include careful selection of indicators based on various criteria, the representativeness of the FADN, and the need to include new themes to address environmental, social, and animal welfare effects of policy.
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