What is it about?
Farm subsidies are often discussed as if they all work in the same way. This study shows that they do not. We examine how different types of support under the EU’s Common Agricultural Policy are linked to the efficiency of livestock farms in Slovenia. Using farm-level data from 2014 to 2021, we look at whether farms are able to produce more output from the same resources, such as land, labour, animals and other inputs. Slovenia is a useful case because many farms are small, operate in difficult conditions and rely heavily on public support — challenges shared by many farms across Central and Eastern Europe. The results show that investment support and other rural development subsidies are associated with higher farm efficiency, both in the short and longer term. By contrast, decoupled payments, agri-environmental payments and support for less-favoured areas are linked to lower efficiency. This does not mean these subsidies are unimportant. Some are designed to protect incomes or support environmental goals. But the findings suggest that if policymakers want subsidies to improve long-term farm performance, support should be better targeted toward modernisation, investment and structural change.
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Why is it important?
This study is timely because the EU’s Common Agricultural Policy is under increasing pressure to support farm incomes, improve productivity, and contribute to environmental goals at the same time. Yet policy debates often treat subsidies as if they have similar effects. Our paper shows that this is misleading. What is unique about the study is that it examines different CAP instruments separately and looks not only at short-term farm efficiency, but also at whether efficiency gains or losses persist over time. Using Slovenian livestock farms as a case, we show that investment support and other rural development subsidies are linked to better technical efficiency, while decoupled payments, agri-environmental payments and support for less-favoured areas are linked to lower efficiency. The findings matter because they suggest that subsidy design is crucial. Public support can help farms modernise and become more productive, but it can also risk maintaining existing inefficiencies if it mainly compensates farms without helping them adapt. This evidence can help policymakers design more targeted agricultural support that better balances income stability, competitiveness and long-term structural change.
Perspectives
For me, this paper is important because it addresses a very practical policy question: do agricultural subsidies help farms become more efficient, or do they sometimes make existing problems more persistent? This question matters not only for researchers, but also for farmers, policymakers and taxpayers. I was particularly interested in the Slovenian case because it reflects many of the challenges faced by smaller livestock farms in Central and Eastern Europe: limited economies of scale, difficult production conditions and strong reliance on public support. These farms are often discussed in terms of income support or survival, but less often in terms of long-term efficiency and adaptation. What I hope readers take from this article is that subsidy design matters. Public support is not automatically good or bad. Its effects depend on the type of instrument, the structure of the farm and the policy objective. I hope the paper contributes to a more nuanced debate about how the Common Agricultural Policy can support both viable farm incomes and long-term productivity improvements.
Professor Imre Fertő
Eotvos Lorand Tudomanyegyetem
Read the Original
This page is a summary of: CAP subsidies, technical efficiency, and its persistence: evidence from Slovenian animal farms, Journal of Productivity Analysis, June 2026, Springer Science + Business Media,
DOI: 10.1007/s11123-026-00815-4.
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