CAP financial support and farm efficiency driving economic development

This paper explores the effect of CAP financial support and efficiency on the economic performance of farm units, considers the I impact single farm payments have on the efficient use of resources and examines the relationship between financial support and faun efficiency. Data Envelopment Analysis (DEA) is the method used for the measurement of efficiency. Results indicate a modest effect on average efficiency scores when single farm payments are included, which on average. signifies the retention of surplus inputs in agriculture. The reorganization of inputs reduces production costs more in the case where no direct payments are made to the farms than in the case with the single farm payment. a result indicating that financial support defers farms from saving on inputs for given output and technology. Financial support and efficiency are found to be inversely related. When financial support makes up a large proportion of farm income. farms tend to be more inefficient in the use of factors of production and vice versa. Significant improvements in profitability and thus in overall economic performance can be gained without any financial support, by the reorganization of inputs. Farms that achieve technical efficiency realize profits only marginally smaller compared to the current situation with financial support, while farms that manage to be both technically and scale efficient gain substantially larger profits. The achievement of efficiency, even without any financial support, can improve farm economic performance and induce economic development for the agricultural sector.