The effect of the implementation of the 2003 Mid-Term Review of the CAP on technical efficiency of beef production. A comparative analysis

The 2003 Mid-Term Review introduced decoupled payments as part of the Common Agricultural Policy; however it allowed the maintenance of limited coupled support. As a result, there are significant differences in subsidies granted in each Member State. We aim to explore the effects on technical efficiency of the different implementations of support payments in the beef sector in selected countries. This analysis contributes to the literature by exploring the effects of both coupled and decoupled support payments on farm level economic performance. For this purpose, country specific output distance functions are estimated together with the effects of a series of technical efficiency drivers, including subsidies, implementing stochastic frontier analysis. Unbalanced panel datasets for France, Ireland, Germany, Scotland and England and Wales are built using Farm Accountancy Data Network information, for the years 2005 to 2012. Our estimates show that decoupled payments had a positive effect on efficiency in all countries, while the retention of coupled support had a significant negative impact on technical efficiency on French beef farms. This suggests that the maintenance of coupled support might compromise farm economic performance in the sector