The Impacts of CAP Subsidies on the Financial Risk and Resilience of Hungarian Farms, 2014–2021

Abstract

The present paper empirically analyzes the efficiency of European Union (EU) subsidies for farms in the Southern Great Plain region of Hungary between 2014 and 2021. The aim of this analysis was to explore whether the subsidies increased the resilience of farms, enhancing their profitability, liquidity and solvency, and economic efficiency, measured by the usual financial indicators of farm performance. The analysis also evaluated the ability of farm businesses to create and retain jobs, i.e., to increase employment in the rural environment, focusing on differences between the subsidized and non-subsidized farms. The research analyzed all agricultural companies of the selected region. The methodology was a non-parametric statistical analysis (Kruskal–Wallis test, Dunnett’s T3 test) for identifying significant differences between subsidized and non-subsidized farms in the 8-year period. Results show that subsidies significantly improved the financial stability, resilience and efficiency of subsidized farms only in the micro size category, and the employment indicators deteriorated more in subsidized farms than in non-subsidized ones. Thus, the intended purpose of the subsidies was not entirely realized, and positive impacts were noticeable only in the micro enterprises. This might imply that subsidies contributed to the survival of non-viable enterprises instead of enhancing their competitiveness.