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Do subsidies drive technical efficiency? The case of portuguese firms in the agribusiness sector

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  • Salustiano, Silvia Ferreira Marques
  • Barbosa, Natália
  • Moreira, Tito Belchior Silva

Abstract

Successive reforms in the Common Agricultural Policy (CAP), enlargements of the European Union (EU) and pressures in the public budget increase the need for empirical studies to assess the role of subsidies in shaping firms’ performance and, hence, to support policy-makers decisions and decision-making in the productive sector. This paper assesses whether subsidies affect the technical efficiency of 1,943 Portuguese agribusiness firms over 2007-2015. By applying stochastic frontier models and fixed-effects models, to calculate the average efficiency of these firms, the results show different effects of subsidies among agribusiness sectors. The stochastic frontier model revealed that the subsidies have a positive and significant impact on the technical efficiency of three sectors, animal production, manufacture of food, and manufacture of paper. Further, except for firms in the forestry and logging sector, Portuguese agribusiness firms had higher average efficiency levels when subsidised, which provides evidence that subsidies could be important and contribute positively to the technical efficiency of Portuguese firms.

Suggested Citation

  • Salustiano, Silvia Ferreira Marques & Barbosa, Natália & Moreira, Tito Belchior Silva, 2020. "Do subsidies drive technical efficiency? The case of portuguese firms in the agribusiness sector," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 58(3), January.
    • Handle: RePEc:ags:revi24:341122
    DOI: 10.22004/ag.econ.341122
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