1. bookVolume 12 (2020): Issue 4 (December 2020)
Journal Details
License
Format
Journal
eISSN
1803-8417
First Published
24 Feb 2009
Publication timeframe
4 times per year
Languages
English
access type Open Access

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

Published Online: 31 Dec 2020
Page range: 494 - 505
Received: 28 Jul 2020
Accepted: 14 Oct 2020
Journal Details
License
Format
Journal
eISSN
1803-8417
First Published
24 Feb 2009
Publication timeframe
4 times per year
Languages
English
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.

Keywords

[1] Aigner, D., Lovell, C. K. & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of econometrics 6(1), 21–37. DOI: 10.1016/0304-4076(77)90052-5.10.1016/0304-4076(77)90052-5Search in Google Scholar

[2] Anghelache, C. (2018). Structural analysis of Romanian agriculture. Romanian Statistical Review Supplement 66(2), 11–18.Search in Google Scholar

[3] Banker, R. D., Charnes, A. & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science 30(9), 1078–1092. DOI: 10.1287/mnsc.30.9.1078.10.1287/mnsc.30.9.1078Search in Google Scholar

[4] Baráth, L., Fertő, I. & Bojnec, Š. (2018). Are farms in less favored areas less efficient? Agricultural Economics, 49(1), 3–12. DOI: 10.1111/agec.12391.10.1111/agec.12391Search in Google Scholar

[5] Bartolini, F. & Viaggi, D. (2013). The common agricultural policy and the determinants of changes in EU farm size. Land Use Policy, 31, 126–135. DOI: 10.1016/j.landusepol.2011.10.007.10.1016/j.landusepol.2011.10.007Search in Google Scholar

[6] Battese, G. E. & Coelli, T. J. (1992). Frontier production functions, technical efficiency and panel data: with application to paddy farmers in India. Journal of Productivity Analysis, 3(1–2), 153–169. DOI: 10.1007/978-94-017-1923-0_10.10.1007/978-94-017-1923-0_10Search in Google Scholar

[7] Battese, G. E. & Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20(2), 325–332. DOI: 10.1007/BF01205442.10.1007/BF01205442Search in Google Scholar

[8] Beluhova-Uzunova, R., Atanasov, D. & Hristov, K. (2017). Analysis of direct payments distribution in Bulgarian agriculture. Trakia Journal of Sciences, 15(1), 282–287. DOI: 10.15547/tjs.2017.s.01.051.10.15547/tjs.2017.s.01.051Search in Google Scholar

[9] Bravo-Ureta, B. E., Solís, D., Moreira López, V. H., Maripani, J. F., Thiam, A. & Rivas, T. (2007). Technical efficiency in farming: a meta-regression analysis. Journal Productivity Analysis, 27, 57–72. DOI: 10.1007/s11123-006-0025-3.10.1007/s11123-006-0025-3Search in Google Scholar

[10] Bularca, E. & Toma, E. (2018). Structural change in the Romanian agriculture: implications for the farming sector. Scientific Papers Series-Management, Economic Engineering in Agriculture and Rural Development, 18(2), 59–66.Search in Google Scholar

[11] Cartwright, A. L. (2001). The return of the peasant. Land reform in post-communist Romania. New York: Routledge. DOI: 10.4324/9781315187341.10.4324/9781315187341Search in Google Scholar

[12] Charnes, A., Cooper, W. W. & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research 2, 429–444. DOI: 10.1016/0377-2217(79)90229-7.10.1016/0377-2217(79)90229-7Search in Google Scholar

[13] Ciaian, P. & Swinnen, J. F. (2006). Land market imperfections and agricultural policy impacts in the new EU member states: a partial equilibrium analysis. American Journal of Agricultural Economics 88(4), 799–815. DOI: 10.1111/j.1467-8276.2006.00899.x.10.1111/j.1467-8276.2006.00899.xSearch in Google Scholar

[14] Ciaian, P., Kancs, D. A. & Swinnen, J. (2014). The impact of the 2013 reform of the common agricultural policy on land capitalization in the European Union. Applied Economic Perspectives and Policy 36(4), 643–673. DOI: 10.1093/aepp/ppu016.10.1093/aepp/ppu016Search in Google Scholar

[15] Ciutacu, C., Chivu, L. & Andrei, J. V. (2015). Similarities and dissimilarities between the EU agricultural and rural development model and Romanian agriculture. Challenges and perspectives. Land Use Policy 44, 169–176. DOI: 10.1016/j.landusepol.2014.08.009.10.1016/j.landusepol.2014.08.009Search in Google Scholar

[16] Coelli, T. J., Rao, D. S. P., O’Donnell, C. J. & Battese, G. E. (2005). An introduction to efficiency and productivity analysis. Berlin: Springer Verlag. DOI: 10.1007/978-1-4615-5493-6.10.1007/978-1-4615-5493-6Search in Google Scholar

[17] Cooper, W. W., Seiford, L. M., Tone, K. & Zhu, J. (2007). Some models and measures for evaluating performances with DEA: past accomplishments and future prospects. Journal of Productivity Analysis, 28(3), 151–163. DOI: 10.1007/s11123-007-0056-4.10.1007/s11123-007-0056-4Search in Google Scholar

[18] Crescenzi, R. & Rodríguez-Pose, A. (2011). Reconciling top-down and bottom-up development policies. Environment and Planning A, 43(4), 773–780.10.1068/a43492Search in Google Scholar

[19] Emrouznejad, A. & Cabanda, E. (2014). Introduction to data envelopment analysis and its applications. In Osman, I. H, Anouze, A. L. & Emrouznejad, A., eds. Handbook of research on strategic performance management and measurement using data envelopment analysis (pp. 235–255). Hershey: IGI Global.Search in Google Scholar

[20] Farrell, M. J. (1957). The measurement of productive efficiency. Journal of the Royal Statistical Society: Series A (General), 120(3), 253–281. DOI: 10.2307/2343100.10.2307/2343100Search in Google Scholar

[21] Feher, A., Goşa, V., Raicov, M., Haranguş, D. & Condea, B. V. (2017). Convergence of Romanian and Europe Union agriculture–evolution and prospective assessment. Land Use Policy 67, 670–678. DOI: 10.1016/j.landusepol.2017.06.016.10.1016/j.landusepol.2017.06.016Search in Google Scholar

[22] Galluzzo, N. (2013). Farm dimension and efficiency in Italian agriculture: a quantitative approach. American Journal of Rural Development 1(2), 26–32.Search in Google Scholar

[23] Galluzzo, N. (2016). An analysis of the efficiency in a sample of small Italian farms part of the FADN dataset. Agricultural Economics 62(2), 62–70. DOI: 10.17221/37/2015-AGRICECON.10.17221/37/2015-AGRICECONSearch in Google Scholar

[24] Galluzzo, N. (2019a). A long-term analysis of the Common Agricultural Policy financial subsidies towards Italian farms. Ukranian Journal on Veterinary and Agricultural Science, 2(1), 12–17. DOI: 10.32718/ujvas2-1.03.10.32718/ujvas2-1.03Search in Google Scholar

[25] Galluzzo, N. (2019b). An analysis of technical efficiency in Icelandic dairy and sheep farms. Studies in Agricultural Economics 121(3), 144–150.Search in Google Scholar

[26] Galluzzo, N. (2020). Analysis of resilience in Romanian rural farm areas by a quantitative approach. Bulgarian Journal of Agricultural Science 26(1), 16–22.Search in Google Scholar

[27] Garrone, M., Emmers, D., Lee, H., Olper, A. & Swinnen, J. (2019). Subsidies and agricultural productivity in the EU. Agricultural Economics 50(6), 803–817. DOI: 10.1111/agec.12526.10.1111/agec.12526Search in Google Scholar

[28] Keeney, M. (2000). The distributional impact of direct payments on Irish farm incomes. Journal of Agricultural Economics 51, 252–265. DOI: 10.1111/j.1477-9552.2000.tb01227.x.10.1111/j.1477-9552.2000.tb01227.xSearch in Google Scholar

[29] Kumbhakar, S. C., Wang, H. J. & Horncastle, A. P. (2015). A practitioner’s guide to stochastic frontier analysis using Stata. Cambridge: Cambridge University Press. DOI: 10.1017/CBO9781139342070.10.1017/CBO9781139342070Search in Google Scholar

[30] Latruffe, L. & Desjeux, Y. (2016). Common Agricultural Policy support, technical efficiency and productivity change in French agriculture. Review of Agricultural, Food and Environmental Studies 97(1), 15–28. DOI: 10.1007/s41130-016-0007-4.10.1007/s41130-016-0007-4Search in Google Scholar

[31] Latruffe, L. & Nauges, C. (2014). Technical efficiency and conversion to organic farming: the case of France. European Review of Agricultural Economics 41(2), 227–253. DOI: 10.1093/erae/jbt024.10.1093/erae/jbt024Search in Google Scholar

[32] Latruffe, L., Bravo-Ureta, B. E., Carpentier, A., Desjeux, Y. & Moreira, V. H. (2017). Subsidies and technical efficiency in agriculture: Evidence from European dairy farms. American Journal of Agricultural Economics 99(3), 783–799. DOI: 10.1093/ajae/aaw077.10.1093/ajae/aaw077Search in Google Scholar

[33] Latruffe, L., Diazabakana, A., Bockstaller, C., Desjeux, Y., Finn, J., Kelly, E., Ryan, M. & Uthes, S. (2016). Measurement of sustainability in agriculture: a review of indicators. Studies in Agricultural Economics 118(3), 123–130. DOI: 10.7896/j.1624.10.7896/j.1624Search in Google Scholar

[34] Lovell, C. K. (1993). Production frontiers and productive efficiency. In Fried, H. O., Schmidt, S. S., eds., The measurement of productive efficiency: Techniques and applications (pp. 3–67). Oxford University Press.Search in Google Scholar

[35] Madau, F. A. (2007). Technical efficiency in organic and conventional farming: Evidence from Italian cereal farms. Agricultural Economics Review, 8(1), 5–21.Search in Google Scholar

[36] Man, M. & Ciurea, M. (2017). Considerations on the Common Agricultural Policy in Romanian Agriculture. Ovidius University Annals, Economic Sciences Series 17(2), 243–248.Search in Google Scholar

[37] Manevska-Tasevska, G., Rabinowicz, E. & Surry, Y. (2016). Pure and compensated efficiency of Swedish dairy farms. Agricultural and Food Science 25(2), 111–123. DOI: 10.23986/afsci.53182.10.23986/afsci.53182Search in Google Scholar

[38] Meeusen, W. & van Den Broeck, J. (1977). Efficiency estimation from Cobb-Douglas production functions with composed error. International Economic Review 18(2), 435–444. DOI: 10.2307/2525757.10.2307/2525757Search in Google Scholar

[39] Mennig, P. & Sauer, J. (2019). The impact of agri-environment schemes on farm productivity: a DID-matching approach. European Review of Agricultural Economics 47(3), 1045–1093. DOI: 10.1093/erae/jbz006.10.1093/erae/jbz006Search in Google Scholar

[40] Minviel, J. J. & Latruffe, L. (2017). Effect of public subsidies on farm technical efficiency: a meta-analysis of empirical results. Applied Economics 49(2), 213–226. DOI: 10.1080/00036846.2016.1194963.10.1080/00036846.2016.1194963Search in Google Scholar

[41] Mishra, A., El-Osta, H. & Gillespie, J. M. (2009). Effect of agricultural policy on regional income inequality among farm households. Journal of Policy Modeling, 31(3), 325–340. DOI: 10.1016/j.jpolmod.2008.12.007.10.1016/j.jpolmod.2008.12.007Search in Google Scholar

[42] Nowak, A., Kijek, T. & Domańska, K. (2015). Technical efficiency and its determinants in the European Union. Agricultural Economics 61(6), 275–283. DOI: 10.17221/200/2014-AGRICECON.10.17221/200/2014-AGRICECONSearch in Google Scholar

[43] Osman, I. H. & Anouze, A. L. (2014). A cognitive analytics management framework (CAM-Part 3): Critical skills shortage, higher education trends, education value chain framework, government strategy. In Osman, I. H, Anouze, A. L. & Emrouznejad, A., eds, Handbook of research on strategic performance management and measurement using data envelopment analysis (pp. 190–234). Hershey: IGI Global.Search in Google Scholar

[44] Petrick, M. & Zier, P. (2011). Regional employment impacts of Common Agricultural Policy measures in Eastern Germany: a difference-in-differences approach. Agricultural Economics, 42(2), 183–193. DOI: 10.1111/j.1574-0862.2010.00509.x.10.1111/j.1574-0862.2010.00509.xSearch in Google Scholar

[45] Picazo-Tadeo, A. J., Gómez-Limón, J. A. & Reig-Martínez, E. (2011). Assessing farming eco-efficiency: a data envelopment analysis approach. Journal of Environmental Management 92(4), 1154–1164. DOI: 10.1016/j.jenvman.2010.11.025.10.1016/j.jenvman.2010.11.02521193265Search in Google Scholar

[46] Rizov, M., Pokrivcak, J. & Ciaian, P. (2013). CAP subsidies and productivity of the EU farms. Journal of Agricultural Economics 64(3), 537–557. DOI: 10.1111/1477-9552.12030.10.1111/1477-9552.12030Search in Google Scholar

[47] Rude, J. (2008). Production effects of the European Union’s single farm payment. Canadian. Journal of Agricultural Economics / Revue Canadienne d’Agroeconomie, 56(4), 457–471. DOI: 10.1111/j.1744-7976.2008.00141.x.10.1111/j.1744-7976.2008.00141.xSearch in Google Scholar

[48] Rudinskaya, T., Hlavsa, T. & Hruska, M. (2019). Estimation of technical efficiency of Czech farms operating in less favoured areas. Agricultural Economics 65(10), 445–453. DOI: 10.17221/52/2019-AGRICECON.10.17221/52/2019-AGRICECONSearch in Google Scholar

[49] Ruggiero, J. (2007). A comparison of DEA and the stochastic frontier model using panel data. International Transactions in Operational Research 14(3), 259–266. DOI: 10.1111/j.1475-3995.2007.00585.x.10.1111/j.1475-3995.2007.00585.xSearch in Google Scholar

[50] Shucksmith, M., Thomson, K. J. & Roberts, D. (2005). The CAP and the regions: the territorial impact of the Common Agricultural Policy. Wallingford: CAB Int. Publishing. DOI: 10.1079/9780851990552.0000.10.1079/9780851990552.0000Search in Google Scholar

[51] Stanciu, S. (2017). A comparative study regarding the European agricultural allocation of funds for rural development during 2007–2013 and 2014–2020. SEA–Practical Application of Science 13, 49–55.Search in Google Scholar

[52] Swinbank, A. (2008). Potential WTO Challenges to the CAP. Canadian Journal of Agricultural Economics / Revue Canadienne d’ Agroeconomie 56(4), 445–456. DOI: 10.1111/j.1744-7976.2008.00140.x.10.1111/j.1744-7976.2008.00140.xSearch in Google Scholar

[53] Turnock, D. (2016). Aspects of independent Romania’s economic history with particular reference to transition for EU accession. New York: Routledge. DOI: 10.4324/9781315568089.10.4324/9781315568089Search in Google Scholar

[54] Vasile, A. J., Mihai, M. & Mirela, P. (2017). Transformations of the Romanian agricultural paradigm under domestic economic policy reforms: an analysis during 1960–2011. Land Use Policy 67, 288–297. DOI: 10.1016/j.landusepol.2017.06.008.10.1016/j.landusepol.2017.06.008Search in Google Scholar

[55] Von Witzke, H. & Noleppa, S. (2007). Agricultural and trade policy reform and inequality: the distribution effects of the direct payments to German farmers under the EU’s new common agricultural policy [Working paper]. Berlin: Humboldt-Universität zu Berlin.Search in Google Scholar

[56] Wang, H. J. & Schmidt, P. (2002). One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels. Journal of Productivity Analysis 18(2), 129–144. DOI: 10.1023/A:1016565719882.10.1023/A:1016565719882Search in Google Scholar

[57] Zhu, X. & Lansink, A. O. (2010). Impact of CAP subsidies on technical efficiency of crop farms in Germany, the Netherlands and Sweden. Journal of Agricultural Economics, 61(3), 545–564. DOI: 10.1111/j.1477-9552.2010.00254.x.10.1111/j.1477-9552.2010.00254.xSearch in Google Scholar

[58] Zhu, X. & Milán Demeter, R. (2012). Technical efficiency and productivity differentials of dairy farms in three EU countries: the role of CAP subsidies. Agricultural Economics Review 13(1), 66–92. DOI: 10.22004/ag.econ.253496.Search in Google Scholar

Recommended articles from Trend MD

Plan your remote conference with Sciendo