Effects of Farm Specialisation, Environmental Subsidies and Agri-Districts on Technical Efficiency in Italian Farms

Nicola Galluzzo

Abstract: Since the early 2000s, Italy has seen a significant increase in the number of agri-districts and rural districts focused on stimulating the production of Ag commodities and high-quality foods that have a low environmental impact. The core purpose of this study is to assess the impact that financial subsidies, allocated under the first and second pillars of the Common Agricultural Policy in the form of environmental payments and subsidies to disadvantaged rural areas, have had on Italian farms in the period from 2004 to 2017. To this end, the study has made an analysis of technical efficiency using a non-parametric approach (DEA) and an analysis of the total factor productivity (TFP), based on a sample of data from the European Farm Accountancy Data Network. By employing a two-step approach for the estimation of the DEA, it has been possible to assess the role of ag-districts and the recognition of certified quality foods on technical efficiency, filling the gap in knowledge regarding the effect that environmental subsidies have on influencing technical efficiency in farming. Drawing some conclusions, the analysis has highlighted an uneven distribution of technical efficiency between various Italian regions and typologies of farming, with a differing impact of financial subsidies allocated under the first and second pillars of the Common Agricultural Policy, both in regards to the technical efficiency of farms and also in relation to environmental protection.

Keywords: Common Agricultural Policy; Data Envelopment Analysis; FADN; two-stage DEA

Date published: 2021-01-04