Productivity and Public Funds: A Directional Distance Function Approach Applied to the Italian Agricultural Sector

Productivity and Public Funds: A Directional Distance Function Approach Applied to the Italian Agricultural Sector

Greta Falavigna (CNR-Ceris, Italy), Alessandro Manello (CNR-Ceris, Italy) and Sara Pavone (University of Insubria, Italy & CNR-Ceris, Italy)
DOI: 10.4018/978-1-4666-4474-8.ch014
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This chapter aims at evaluating the effect of Italian regional policies in the agricultural field. Performances of regional systems have been evaluated through an extension of Data Envelopment Analysis (DEA), the Directional Distance Function (DDF), which allows one to consider emissions of ammonia as undesirable output. Productivity and efficiency of agricultural systems are based not only on agri-production but also on the contraction of emissions deriving from the fertilizer's usage. Results show that a convergence path between productivity and public funds exists and that there are differences among Italian macro-areas considering both efficiency and productivity dynamics. In particular, if efficiency scores are interpreted with the amount of public funds distributed by the Rural Development Programs over the period 2000-2006, empirical evidence suggests that more resources are received by disadvantaged areas. Findings underline that the most disadvantaged areas, in terms of productivity, are those receiving more structural public funds.
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Literature Review

Efficiency in agricultural industry is a field very common in literature because from the one hand people are interested to know what they are eating; from the other hand, Governments are interested to have feedbacks on their policies.

The importance of the rural development policy appears clear considering that more than the 90% of the entire European territory could be classified as rural. Moreover, it is estimated that the 56% of European population resides in these areas. These considerations show the necessity to preserve the countryside and to support economical activities localized in disadvantaged regions.

The concept of rural development is increasingly important in policy and research and, for this reason, findings from productivity analysis will be interpreted considering the distribution of public funds. The main aim of this work is to control if policies are able to stimulate a convergence path.

Even more EU directives have had the aim to protect the environment and then to encourage the adoption of sustainability criteria and certifications (2004/35/CE).

In particular, on the webpage of the European Commission1 there is the clear incentive for farmers to produce preserving the environment.

To acknowledge this directive, each Country of European Union promulgated agricultural policies with the aim to translate in national laws the eco-sustainability issues. Starting from this point of view, many authors analyzed the effects of the implementation of these directives, simulating possible scenarios, as the work of Bartolini et al. (2007), where the impact of the water policy, relating to the directive EC 60/2000, is studied.

To doing this, many authors focused their work on the analysis of interactions of ecological and economic factors in the field of Land Degradation (LD), considered as the most representative variable in both environmental projections and policy strategies (Salvati and Zitti, 2008). An interesting analysis on performances of rural districts in relation to the Land Degradation field has been done by Salvati and Carlucci (2011). They approached the problem starting from the definition of productivity and economic indexes as the share of agriculture in total product and the per capita value added. As suggested by Salvati and Carlucci (2011), Italian rural districts are numerous and slightly different from physical and socioeconomic point of view. These diversities, i.e. climate, landscape, size, urbanization, can be very significant considering the agricultural productivity.

Key Terms in this Chapter

Efficiency: Performance measure capturing the idea of minimizing costs.

Italian Agricultural Systems: Agricultural area in which Italy has been subdivided to study performances.

Productivity: measure of growth in terms of performance.

Rural Development Programs: A tool for sustaining European rural areas. It is possible to identify three lines of actions: economic, environmental and social.

Malmquist-Luenberger Indexes: Productivity measures from DDF point of view.

Directional Distance Function: Specification of DEA where it is considered the possibility to use bad inputs or bad outputs.

Data Envelopment Analysis: Non-parametric methodology for computing efficiency scores.

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