The effect of subsidies on tecnical efficiency of Algerian agricultural sector: using stochastic frontier model (SFA)

Abstract

AbstractThis study seeks to determine the impact of agricultural subsidies on the efficiency of Algerian farms. To do so, we estimated a Stochastic Frontier Analysis (SFA) for Algerian data covering the period from1970 to 2020. Two variables were used to describe the agricultural subsidy: the first is total agricultural support, and the second is a dummy variable that takes the values 0 and 1 to express the coupling of subsidies to production. The variable of support for agriculture production and producers takes the value of one (1) in the era when the support is not related to production (decoupled support). It takes the value zero (0) when there is explicit support for production and producers (coupled support).The findings revealed that total subsidies had a negative impact and statistically significant on the technical efficiency of Algerian farms. While, the decoupling has a positive effect on efficiency (negative on inefficiency), but without significance.