Technical efficiency of arable farms in Serbia: do subsidies matter?

Abstract

This paper analyses the technical efficiency of arable farms in Serbia and its determinants using a two-stage double bootstrap Data Envelopment Analysis (DEA) approach on the Farm Accountancy Data Network (FADN) data from 2014 and 2015 with special emphasis on the impact of agricultural subsidies on the technical efficiency of arable farms in Serbia. Bias-corrected DEA efficiency scores were first calculated and then regressed on a set of explanatory variables using the double-truncated regression approach. The estimates suggest that the share of rented land, land to labour ratio and financial stress variables are the main determinants of arable farm efficiency in Serbia. For the subsidies we found that area payments and input subsidies have some impacts on the technical efficiency of arable farms. In contrast, investment and other subsidies were found to have an insignificant impact on farm technical efficiency. These results suggest that the future potential shift of the Serbian agricultural support towards the Common Agricultural Policy (CAP)-like area based payments is expected to have a minimal but likely positive impact on farms technical efficiency in Serbia.