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Subsidies and agricultural productivity in the EU
Author(s) -
Garrone Maria,
Emmers Dorien,
Lee Hyejin,
Olper Alessandro,
Swinnen Johan
Publication year - 2019
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12526
Subject(s) - subsidy , productivity , economics , common agricultural policy , agriculture , conditional convergence , agricultural productivity , panel data , pillar , payment , direct payments , convergence (economics) , agricultural economics , natural resource economics , international trade , european union , econometrics , macroeconomics , finance , market economy , structural engineering , biology , engineering , ecology
This paper investigates the relationship between EU agricultural subsidies and agricultural labor productivity growth by estimating a conditional convergence growth model. We use more representative subsidy indicators and a wider coverage (panel data from 213 EU regions over the period 2004–2014) than have been used before. We find that, on average, EU's Common Agricultural Policy (CAP) subsidies increase agricultural labor productivity growth, but this aggregate effect hides important heterogeneity of effects of different types of subsidies. The positive effect on productivity comes from decoupled subsidies, that is, Pillar I decoupled payments and some Pillar II payments. Coupled Pillar I subsidies have the opposite effect: they slow down productivity growth.