An Examination of the Relationship Between Subsidies on Production and Technical Efficiency in Agriculture: The Case of Cotton Producers in Greece
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Subsidies on production have long been criticized for protecting producers from competition, and thus
removing an incentive for efficient use of the resources. This study undertakes the examination of the
impact of partially decoupled subsidies on the technical efficiency scores of cotton producers in
Greece. The results indicate that compensatory area payments reduce the efficiency scores of the
producers by diverting resources from products for which the subsidy is based on the area planted to
the production of cotton, for which the aid is related to the volume of output.