Influence of agricultural policy support on farmers' technical efficiency: an application to France

This paper investigates how the various changes in the policy supporting agriculture in the European Union, namely the Common Agricultural Policy (CAP) and its various types of subsidies, have affected farms’ technical efficiency in France between 1990 and 2006. Several efficiency scores are computed: using the Free Disposal Hull (FDH) method; using Data Envelopment Analysis (DEA) under constant (CRS) and variable returns to scale (VRS); scale efficiency scores calculated with DEA; and DEA technical efficiency scores corrected for bias both under CRS and VRS with the bootstrapping method. We consider four periods: 1) 1990-1994 is the benchmark period; 2) 1995-1999 is the period where the effect of the first CAP reform is investigated 3) 2000-2005 represents the period following the second CAP reform; 4) 2006 is the first year of implementation of the latest CAP reform in France. Three types of farming – field crop, dairy and beef cattle – are considered. Graphs and t-tests indicate a significant reduction in efficiency in the period following the first CAP reform compared to the benchmark period. Econometric regressions do not reveal unambiguous findings, as the effect of a particular type of subsidies was found to be negative or positive depending on the efficiency variable and depending on the type of farming considered.