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Relationships between technical efficiency and subsidies for Czech farms: A two-stage robust approach

Lukáš Frýd and Ondřej Sokol

Socio-Economic Planning Sciences, 2021, vol. 78, issue C

Abstract: Subsidies for agriculture in the European Union have been a matter of debate for a long time. However, even after many years of debate, it remains unclear whether the subsidies have a positive or negative effect on farm efficiency. We propose a robust two-stage framework to study the subsidies-effect to farm technical efficiency while controlling farm heterogeneity. First, technical efficiency scores are computed using a modern robust data envelopment analysis model. Then, a quantile regression model is applied to explain the relationship between technical efficiency and the total subsidies and other commonly used explanatory variables. In the empirical part, we analyze a sample of Czech farms during the period from 2010 to 2015. It is revealed that the subsidies-effect is negative and varies based on the technical efficiency of the farm. Higher efficient farms face a less distorting effect than lower efficient farms.

Keywords: Technical efficiency; DEA Agriculture; Subsidies; Quantile regression (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.seps.2021.101059

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