Are the Agricultural Subsidies Based on the Farm Size Justified? Empirical Evidence from the Czech Republic

Eliška Svobodová · Radka Redlichová · Gabriela Chmelíková · Ivana Blažková

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Agricultural economics and policies Agricultural Economics and Policy Agricultural Economics and Practices

Abstract

The paper aims to explore the relationship between size, production orientation, and performance in the Czech agriculture and to answer the research question as to what extent a farm size and a product orientation of farm do matter in relation to its productivity and profitability. We use data from FADN CZ database (Farm Accountancy Data Network—Czech Republic) of conventional farms oriented on fieldcrops production, milk production, other grazing livestock and mixed production, and we cover the period from 2015–2020. Pursuing an econometric approach (ANOVA and multivariate regression analysis), we test productivity and profitability differentiation among the different-sized and different production orientation companies. Finally, subsidies and their effects on different groups of companies are assessed. The findings from testing our empirical model indicate that very large farms have statistically significantly higher total factor productivity than large farms, which perform better than medium and small farms. Average productivity of large-size farms compared to small and medium farms is 1.4 times higher in terms of total factor productivity, more than two times higher in terms of agricultural land productivity, and 3.2 times higher in terms of labour productivity. The findings show that farms with field production statistically significantly outperform farms with orientation on other grazing livestock and mixed production. Different levels of productivity are translated into differentiation in the profitability. The highest profitability ratios are achieved by large farms followed by very large, medium, and small ones. The assessment of ratio of subsidies to agricultural production shows that small farms received 2.3 times higher agricultural subsidies per unit of agricultural production compared to very large farms.

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References

2014The Size Distribution of Farms and International Productivity Differences 2009Reconsidering Conventional Explanations of the Inverse Productivity–Size Relationship 2004Technical efficiency and farm size: a conditional analysis 2021Are There Too Many Farms in the World? Labor Market Transaction Costs, Machine Capacities, and Optimal Farm Size 2004Farm productivity and efficiency in the CEE applicant countries: a synthesis of results 2015Is There a Farm Size–Productivity Relationship in African Agriculture? Evidence from Rwanda 2019Close to the edge: High productivity at plot peripheries and the inverse size-productivity relationship 2014Considering Technical and Allocative Efficiency in the Inverse Farm Size–Productivity Relationship

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