Modelling the impact of state support types on agricultural production, considering exogenous shock and cyclical factors

Roman Ivanov, Yurii Hurtovyi, Nataliia Maksyshko, Volodymyr Katan and Mykola Osypchuk

Agricultural and Resource Economics: International Scientific E-Journal, 2025, vol. 11, issue 3

Abstract: Purpose. The purpose of the study is to empirically assess the impact of individual measures of state support for agriculture in the EU, Ukraine, and New Zealand, considering production and market factors and external challenges that determine the value of agricultural products. Methodology / approach. To achieve the goal, production function models were used in six successive modifications, considering (1) the rate of technological progress, (2) total budget support for agriculture, (3) individual measures of state support determined as statistically significant, and (4) their combination with land resources – agricultural area, (5) removed statistically insignificant parameters, (6) specific adjustment variables. To verify the reliability and accuracy of the models built based on data for 2010–2022, they are tested by forecasting the value of agricultural products for 2023, and the autocorrelation of the residuals is estimated using the Ljung-Box test. Results. The study proves that the effectiveness and impact of individual state support measures on the formation of agricultural product value differs significantly between countries. While the financing of agricultural knowledge and innovation is one of the key development drivers in the EU, inspection and controls are a growth stimulator in New Zealand. At the same time, they act as a barrier in Ukraine, demonstrating negative elasticity. The inclusion of adjustment variables allows for a quantitative estimation of the negative impact of exogenous shocks, the COVID-19 pandemic, and the Russian-Ukrainian war. The analysis of production factors demonstrates the pivotal role of capital investments, effective use of irrigated land, yield, as well as foreign trade factors for Ukraine and New Zealand, which have export-oriented agricultural production. Originality / scientific novelty. For the first time, the proposed models integrate explanatory variables that reflect large-scale exogenous shocks, namely the macroeconomic impact of COVID-19, considering demographic losses and the gradual fading of the pandemic in the EU, an integrated indicator of the destructive consequences of the war, which includes demographic casualties, destruction of irrigation and energy infrastructure in Ukraine. Practical value / implications. The results obtained have practical significance for improving the mechanisms of agricultural policy aimed at increasing production results and the sustainability of agriculture in the face of global and local crises.

Keywords: Agribusiness; Agricultural Finance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:areint:387543

DOI: 10.22004/ag.econ.387543

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