THE RELATIONSHIP BETWEEN TOTAL FACTOR PRODUCTIVITY AND SUBSIDIES IN THE CASE OF ROMANIAN FARMS

The paper studies the determinants of total factor productivity of different size farms in Romania, and, in particular, the effect of the CAP subsidies on productivity. It uses the FADN public database and runs a multilevel mixed effects model. The most important conclusion is that subsidies are not conducing to productivity in the case of the Romanian farms. This conclusion is valid irrespective of the size and the type of the farm, with the exception of medium-sized dairy farms. Subsidies introduce an additional distortion to the large farms, which increase their land holding simply because the subsidies per acre are larger than the rent per acre.