Do subsidies drive productivity? Farm-level evidence from the Russian Far East

Abstract

Do subsidies drive productivity at the farm-level? To address this question, we use farm-level data from the Amur region in Russia for 2010—2014. Using this data, we assess corporate farm production function and find no economically or statistically significant cumulative effect of state subsidies on total factor productivity within three years after the subsides were received. Our findings are robust to the choice of the production functional form, time period, and land measures. So one might conclude that subsidies to corporate farms in Amur Oblast serve primarily as a tool of income support not as a driver of the productivity change. Our research contributes to the discussion about the effects of state supports and subsidies on agricultural development, productivity, and market structure in Russia.