Productivity, Subsidies, and Agricultural Specialization: Evidence from the Russian Far East

Abstract

Are the effects of subsidies on farm productivity heterogeneous? Does the direction and magnitude of subsidies impact depend on farm specialization? To address this question, I use farm-level data from Amur region in the Russian Far East for 2010–2014. The data set includes farms inputs and output as well as state subsidies and degree of farm specialization. The latter is defined as the share of crop production in total farm revenue. The sample of farms is not random but includes almost the entire set of corporate farms in the Amur Region. Using the data, I estimate the production function that allows me to study the relationships between total factor productivity (TFP), farms specialization and state subsidies. To test whether farm specialization moderates the impact of subsidies on TFP, an interaction term between specialization and subsidies was included in the model. So, I study how the marginal effects of subsidies change conditional on degree of specialization. My findings support the heterogeneous effect of subsidies on TFP depending on the degree of farm specialization. High degree of specialization on livestock production is associated with negative effects of subsidies on TFP, while I don’t fine a statistically significant connection between subsides and TFP for farms specializing on crop production. The research contributes to the discussion about the effects of state supports and subsidies on agricultural development and productivity in Russia and particularly in the Russian Far East

Keywords

• agriculture
• agricultural enterprises
• agricultural policy
• state support for agricultural producers
• state subsidies
• total factor productivity
• industry specialization
• animal husbandry
• plant growing
• amur region
• russian far east