Evaluating the effect of subsidies for rural development on agri-food and forestry firms

Purpose This paper aims to evaluate the impact of the subsidies established by Measure 123 of the Rural Development Policy on the productivity of a sample of agri-food and forestry companies in the region of Asturias over the period 2006-2009. Design/methodology/approach The authors estimate a stochastic frontier function which allows subsidies to be considered as affecting both the level of technical efficiency and technical progress. Findings The results show that while subsidies have a positive effect on the technical progress of companies in the agri-food industry, for the forestry industry, the effect materializes as an improvement in technical efficiency. Additionally, other factors affecting either, technical progress and technical efficiency were identified. Originality/value This study adopts a model that allows the separate identification of the effect of subsidies on the level of efficiency, on the one hand, and on the technical progress, on the other.