Intensive and extensive impacts of EU subsidies on pesticide expenditures at the farm level

ABSTRACT This paper studies the intensive and extensive effects of European subsidies on pesticide expenditures at the farm level. Intensive effects refer to the relative value of pesticide expenditures to sales, while extensive effects consider acreage effects. Our approach is original insofar as we consider the consequences of EU policies at the farm level. The analysis relies on the French Farm Accountancy Data Network database from 2007 to 2015 which provides detailed information on farm structure and accounting. The influence of subsidies on pesticide expenditures is measured through a simultaneous equation model using panel data. Even if the aggregate value of EU subsidies does not seem to influence pesticide expenditures, each of the pillars has for its part a significant influence: the 1st pillar contributes to increasing pesticide expenditures, while the 2nd pillar leads to decreasing pesticide expenditures, except for subsidies to crop insurance policies. Overall subsidies and subsidies from the 1st pillar have also a significant and positive impact on farm acreage. The very contrasting effect of European subsidies on pesticide expenditures thus questions the effectiveness of public policies towards the issue of environmentally friendly practices.