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The Effect of CAP Subsidies on the Technical Efficiency of Polish Dairy Farms

Jerzy Marzec and Andrzej Pisulewski

Central European Journal of Economic Modelling and Econometrics, 2017, vol. 9, issue 3, 243-273

Abstract: The main aim of this paper is to analyse the effect of Common Agricultural Policy (CAP) subsidies on technical efficiency of Polish dairy farms. We have distinguished several types of subsidies and provided an analysis to find out which types are most likely to engender systematic differences in technical efficiency. A balanced panel of microeconomic data on Polish dairy farms over an eight-year period (between 2004 and 2011), taken from the Farm Accountancy Data Network (FADN), is used. The translog production function is estimated by employing the Bayesian approach. The empirical results show that the elasticity of production with respect to livestock is the highest, whereas with respect to feed is the lowest. The mean technical efficiency in the covered period is 83%. The research reveals the negative effect of subsidies on technical efficiency.

Keywords: stochastic frontier analysis; dairy farms; Bayesian approach; panel data (search for similar items in EconPapers)
JEL-codes: Q12 D24 C11 C23 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:psc:journl:v:9:y:2017:i:3:p:243-273