The regional structure of the CAP subsidies and the factor productivity in agriculture in the EU 28

Abstract

he question of what effect the subsidies have on the productivity of farms in the EU has been studied by many authors, but has not yet been answered. A further research is thus required both in relation to the period since the decoupling reform, and in relation to the new member countries in the EU 28. In the paper, it is suggested that the productivity of resources in agriculture is not affected by the total amounts of subsidies, but by their structure. A three-stage spatial analysis was made of an EUFADN representative sample in the years 2007–2012: in the first stage, clusters of regions with significantly different agricultural support models were identified; in the second, it was determined whether the structure of the political rent, reflecting the different support models in the EU 28, is a significant determinant of the productivity of capital, land and labour on farms when subsidies are excluded and when they are included in the analysis. In the third stage, a robust model has been estimated (employing GLS) to relate the factors productivity to the EUFADN subsidies and to the location variables identified by the cluster analysis. The analysis confirmed that the qualitative predictor, i.e. “a structure of agricultural support”, was a significant factor influencing the capital productivity over the whole of the period.