A Technical Efficiency Analysis of Financial Subsidies Allocated by the Cap in Romanian Farms Using Stochastic Frontier Analysis

Abstract

The Common Agricultural Policy (CAP) has undergone radical changes as a consequence of international agreements. Through a parametric approach based on Stochastic Frontier Analysis, it has been possible to estimate the impact of financial subsidies allocated under the Common Agricultural Policy for the period from 2007 to 2017 in the framework of the first and second pillars to Romanian farms that are part of the FADN dataset. The findings have revealed the positive effect of financial subsidies allocated to disadvantaged rural areas in increasing technical efficiency, and a modest impact of decoupled payments disbursed under the first pillar of the CAP on the Romanian farms investigated.

Analysis of Specialisation and Management in Italian Farms Through a Partial Least Square-Structural Equation Modelling Approach

“…In fact, farm management represents one of the most important pillars in increasing the technical and economic efficiency of farming (Galluzzo, 2018a;2020;Latruffe et al, 2017;Forleo et al, 2021). An adequate farm management is able to increase productivity, even if the farming specialisation and the geographical location of farms also have some impact on productivity, as estimated using different quantitative approaches (Liu et al, 2021).…”

“…For farmers, it is very important to diversify their production and to obtain a positive effect from financial subsidies allocated through the CAP, which have had some impacts on the technical efficiency in farms (Galluzzo, 2020;Forleo et al, 2021;De Roest et al, 2018;De Rosa et al, 2019). In any event, one of the main targets of farmers is to reduce risks in the management of farms, and addressing risk implies a use of financial resources by farmers in function of a different productivity and allocation of the resources available to them (Vigani & Kathage, 2019), even if diversification in farming represents one of the most efficient tools for reducing income variability (Vera & Colmenero, 2017).…”

“…In general, the aging demographic of farmers, the scarcity of new labour-savings technologies, and various exogenous constraints linked to a modest generational turnover of farms to young farmers, have induced many farmers to quit and retire (Galluzzo, 2018a). Since 2007, however, specific financial subsidies allocated through the second pillar of the CAP have had an effect in stimulating a greater generational turnover in farms that has led to notable improvements in technical efficiency (Galluzzo, 2018a;2020).…”

Advancing the multifactor model of Stochastic Frontier Analysis

“…Among the Russian studies that use the SFA method and tackle certain sectors of the economy, works [13][14][15][16][17][18][19] are worth considering. The analysis reported in paper [13] confirms the applicability of the SFA method for assessing the effectiveness of homeowners' associations (HOAs).…”

“…Paper [18] reports the results of studying and applying the economic methods of DEA and SFA to measure the effectiveness of financial subsidies for farms. The study results show the positive impact of financial subsidies, as well as the impact of non-binding payments, on the examined farms.…”