Agris on-line Papers in Economics and Informatics

Faculty of Economics and Management CULS Prague, Kamýcká 129, 165 00 Praha - Suchdol

The international peer-reviewed scientific journal, ISSN 1804-1930

Impact of Subsidies on Technical Efficiency of Meat Processing Companies

Tamara Rudinskaya, Zdeňka Náglová

DOI: 10.7160/aol.2018.100106

Agris on-line Papers in Economics and Informatics, No 1 /2018, March

pp. 61-70

Rudinskaya, T. and Náglová, Z. (2018) “Impact of Subsidies on Technical Efficiency of Meat Processing Companies", AGRIS on-line Papers in Economics and Informatics, Vol. 10, No. 1, pp. 61-70. ISSN 1804-1930.DOI 10.7160/aol.2018.100106.


The paper deals with the technical efficiency analysis of meat processors in the Czech Republic and evaluates an impact of subsidies on companies’ technical efficiency. Albertina database which collects accounting data of the Czech meat processors was used for the empirical analysis for the programming period 2007-2013. Subsidies data was collected from the public register of recipients of the Ministry of Agriculture of the Czech Republic. In total, 207 meat processors were analysed. The methodological approach taken in this study is based on translogarithmic production function and Stochastic Frontier Analysis. True Random Effects model, and Battese and Coelli model were used to evaluate the impact of subsidies on technical efficiency. The results of both used methods indicate positive impact of subsidies on meat processors technical efficiency. Material input displays the highest elasticity; the lowest elasticity belongs to production factor Capital. Technical change has a positive impact on production.


Stochastic Frontier Analysis, technical efficiency, meat processors, subsidies, investments.


  1. Aigner, D., Lovell, C. A. K. and Schmidt, P. (1977) “Formulation and Estimation of Stochastic Frontier Production Function Models”, Journal of Econometrics, Vol. 6, No. 1, pp. 1-37. ISSN 0304-4076. DOI 10.1016/0304-4076(77)90052-5.
  2. Battese, G. and Coelli, T. (1992) “Frontier production functions, technical efficiency and paneldata with application to paddy fanners in India”, Journal of Productivity Analysis, Vol. 3, No. 1,pp. 153-169. ISSN 1573-0441. DOI 10.1007/BF00158774.
  3. Battese, G. and Coelli, T. (1995) “A model for technical inefficiency effects in a stochasticfrontier production function for panel data”, Empirical Economics, Vol. 20, No. 2, pp. 325-332.ISSN 1435-8921. DOI 10.1007/BF01205442.
  4. Beckeman, M. and Skjolkebrand, C. (2007) “Cluster/networks promote food innovations”,Journal of Food Engineering, Vol. 79, No. 4, pp. 418-1425. ISSN 0260-8774. DOI 10.1016/j.jfoodeng.2006.04.024.
  5. Bergström, F. (2000) “Capital subsidies and the performance of firms”, Small Business Economics,Vol. 14, No. 3, pp. 183-193. ISSN 1573-0913. DOI 10.1023/A:1008133217594.
  6. Bernini, C. and Pellegrini G. (2011) “How are growth and productivity in private firms affectedby public subsidy? Evidence from a regional Policy”, Regional Science and Urban Economics,Vol. 41, No. 3, pp. 253-265. ISSN 0166-0462. DOI 10.1016/j.regsciurbeco.2011.01.005.
  7. Bernstein, J. and Mamuneas, T. (2008) “Public infrastructure, input efficiency and productivitygrowth in the Canadian food processing industry”, Journal of Productivity Analysis, Vol. 29,pp. 1-13. ISSN 1573-0441. DOI 10.1007/s11123-007-0063-5.
  8. Boudný, J. and Janotová, B. (2015) “Ekonomika výroby vepřového masa – postavení ČR v Evropě”("Economics of pig meat production - position of CR in Europe", in Czech), Náš chov, Vol. 75,pp. 73 – 78. ISSN 0027-8068.
  9. Cerqua, A. and Pellegrini, G. (2014) “Do subsidies to private capital boost firm´s growth? A multipleregression discontinuity design approach”, Journal of Public Economics, Vol. 109, pp. 114-126.ISSN 0047-2727. DOI 10.1016/j.jpubeco.2013.11.005.
  10. Coad, A. and Rao, R. (2008) “Innovation and firm growth in high-tech sectors: A quantileregression approach”, Research Policy, Vol. 37, No. 4, pp. 633-648. ISSN 0048-7333. DOI 10.1016/j.respol.2008.01.003.
  11. Čechura, L. (2009) “Zdroje a limity růstu agrárního sektoru” (in Czech), Prague, Wolters Kluwer,p. 296, ISBN 978-80-7357-493-2.
  12. Čechura, L. and Hockmann, H. (2010) “Sources of Economical Growth in the CzechFood Processing”, Prague Economic Papers, Vol. 2, pp. 169-182. ISSN 2336-730X. DOI 10.18267/j.pep.370.
  13. Čechura L. and Hockmann H. (2011) “Efficiency and Heterogeneity in Czech Food ProcessingIndustry”, EAAE 2011 Congress Change and Uncertainty. ETH Zurich.
  14. Čechura L. and Hockmann H. (2017) ”Heterogeneity in Production Structures and Efficiency:An Analysis of the Czech Food Processing Industry”, Pacific Economic Review, Vol. 22, No. 4,pp. 702-719. ISSN 1468-0106. DOI 10.1111/1468-0106.12217.
  15. Čechura, L. and Malá, Z. (2014) ”Technology and Efficincy Comparison of Czech and SlovakProcessing Companies”, Procedia Economics and Finance, Vol. 12, pp. 93-102. ISSN 2212-5671. DOI 10.1016/S2212-5671(14)00324-4.
  16. Daňková, A. and Bosáková, Z. (2005) ”The Competitiveness of the Chosen Processing BranchesSlovak Food Industry”, Ekonomický časopis, Vol. 53, No. 4, pp. 415-426. ISSN 0013-3035.
  17. Farrell, M. J. (1957) “The Measurement of Productive Efficiency”, Journal of the Royal StatisticalSociety, Vol. 120, No. 3, pp. 253-290. ISSN 00359238.
  18. Geroski, P. A. (2005) “Understanding the implications of empirical work on corporate growthrates”, Managerial and Decision Economics, Vol. 26, No. 2, pp. 129-138. ISSN 1099-1468. DOI 10.1002/mde.1207.
  19. Geroski, P. A., Machin, J. and Walters, C. F. (1997) “Corporate growth and profitability”, Journalof Industrial Economics, Vol. 45, No. 2, pp. 171-189. ISSN 1467-6451. DOI 10.1111/1467-6451.00042.
  20. Greene, W. (2005) “Fixed and Random Effects in Stochastic Frontier Models”, Journal of ProductivityAnalysis, Vol. 23, No. 1, pp. 7–32. ISSN 1573-0441. DOI 10.1007/s11123-004-8545-1.
  21. Hadley, D. (2006) “Patterns in technical efficiency and technical change at the farm-levelin England and Wales, 1982-2002”, Journal of Agricultural Economics, Vol. 57, No. 1, pp. 81-100.ISSN 1477-9552. DOI 10.1111/j.1477-9552.2006.00033.x.
  22. Harris, R., and Trainor, M. (2005) “Capital subsidies and their impact on total factor productivity:firm-level evidence from Northern Ireland”, Journal of Regional Science, Vol. 45, No. 1, pp. 49–74.ISSN 1467-9787. DOI 10.1111/j.0022-4146.2005.00364.x.
  23. Jondrow, J., Lovell, C. A. K, Materov, I. S. and Schmidt, P. (1982) “On the estimation of technicalinefficiency in the stochastic frontier production function model”, Journal of Econometrics, Vol. 19,No. 2, pp. 233-238. ISSN 0304-4076. DOI 10.1016/0304-4076(82)90004-5.
  24. Karagiannis, G. and Sarris, A. (2005) “Measuring and explaining scale efficiencywith the parametric approach: The case of Greek tobacco growers”, Agricultural Economics,Vol. 33, No. 3, pp. 441–451. ISSN 1574-0862. DOI 10.1111/j.1574-0864.2005.00084.x.
  25. Kumbhakar, S. C. and Lovell, C. A. K. (2000) “Stochastic Frontier Analysis”, Cambridge, CambridgeUniversity Press, p. 333, ISBN 0-521-48184-8.
  26. Kumbhakar, S. C. and Lien, G. (2010) “Impact of Subsidies on Farm Productivity and Efficiency”.In: Ball V., Fanfani R., Gutierrez L. (eds). "The Economic Impact of Public Support to Agriculture.Studies in Productivity and Efficiency". Springer, New York, p. 348. ISBN 978-1441963840.
  27. Menrad, K. (2004) “Innovations in the food industry in Germany”, Research Policy, Vol. 33,No. 6-7, pp. 845–878. ISSN 0048-7333. DOI 10.1016/j.respol.2004.01.012.
  28. Mezera, J. and Špička, J. (2013) “Economic Effects of Investment Support of Adding Valueto Food Products”, Agris on-line Papers in Economics and Informatics, Vol. 5, No. 1, pp. 39-49.ISSN 1804-1930.
  29. Mezera, J., Němec, R. and Špička, J. (2014) “Support of strengthening the cooperation and efficiencyfactors accelerating innovation processes in the food industry”, Agricultural Economics-Czech,Vol. 60, No. 7, pp. 295-300. ISSN 0139-570X.
  30. Ministry of Agriculture of Czech Republic (2016) “Panorama of food industry 2016”, Ministryof Agriculture of Czech Republic, Prague. ISBN 978-80-7434-387-2.
  31. Minviel, J. J. and Latruffe, L. (2017) “Effect of public subsidies on farm technical efficiency:a meta-analysis of empirical results”, Applied Economics, Vol. 49, No. 2, pp. 231-226.ISBN 1466-4283. DOI 10.1080/00036846.2016.1194963.
  32. Mroczek, R. (2013) “Investment, assets of enterprises and productivity of the polish food industry”In: Hradec Economic Days 2013 – International Conference. Hradec Králové, pp. 258-265.
  33. Nivievskyi, O. and von Cramon-Taubadel, S. (2008) “The Determinants of Dairy FarmingCompetitiveness in Ukraine”, 12th EAAE Congress, Gent, Belgium, 27-30 August.
  34. Pechrová, M. and Vlašicová, E. (2013) “Technical Efficiency of Organic and Biodynamic Farmsin the Czech Republic”, Agris on-line Papers in Economics and Informatics, Vol. 5, No. 4,pp. 143-152. ISSN 1804-1930.
  35. Piesse, J. and Thirtle, C. (2000) “A stochastic frontier approach to firm level efficiency, technologicalchange and productivity during the early transition in Hungary”, Journal of Comparative Economics,Vol. 28, No. 3, pp. 473–501. ISSN 0147-5967. DOI 10.1006/jcec.2000.1672.
  36. Rudinskaya, T. (2017) “Heterogeneity and efficiency of food processing companies in the CzechRepublic”, Agricultural Economics – Czech, Vol. 63, No. 9, pp. 411–420. ISSN 0139-570X. DOI 10.17221/1/2016-AGRICECON.
  37. Skuras, D., Tsekouras, K., Dimara. E. and Tzelepis. D. (2006) “The Effects of Regional CapitalSubsidies on Productivity Growth: A Case Study of the Greek Food and Beverage ManufacturingIndustry”, Journal of Regional Science, Vol. 46, No. 2, pp. 355-381. ISSN 1467-9787. DOI 10.1111/j.0022-4146.2006.00445.x.
  38. Špička, J., Náglová, Z. and Gürtler, M. (2017) “Effects of the investment support in the Czechmeat processing industry”, Agricultural Economics- Czech, Vol. 63, No. 8, pp. 356-369. ISSN 0139-570X. DOI 10.17221/367/2015-AGRICECON.
  39. Trnková, G., Malá, Z. and Vasilenko, A. (2012) “Analysis of the Effects of Subsidieson the Economic Behavior of Agricultural Businesses Focusing on Animal Production”, Agrison-line Papers in Economics and Informatics, Vol. 4, No. 4, pp. 115-126. ISSN 1804-1930.
  40. Wynarczyk, P. and Thwaites, A. (1997) “The Economic Performance. Survival and Non-Survivalof Innovative Small Firms ”. In: Oakey. R., & Mukhtar. S. "New Technology Based Firmsin the 1990s". London: Paul Chapman.
  41. Zhu, X., Lansink, A. O. (2008) “Technical Efficiency of the Crop Farms Under the Various CAPReforms: Empirical Studies of Germany, the Netherlands and Sweden.“ In: 107th EAAE EuropeanAssociation of Agricultural Economists, Sevilla, Spain.
  42. Zhu, X. and Oude Lansink, A. (2010) “Impact of CAP Subsidies on Technical Efficiency of CropFarms in Germany, the Netherlands and Sweden.”, Journal of Agricultural Economics, Vol, 61,No. 3, pp. 545–564. ISSN 1477-9552. DOI 10.1111/j.1477-9552.2010.00254.x.

Full paper

icon of PDF documents Full paper (.pdf, 585.21 KB).

ISSN 1804-1930
© Agris on-line Papers in Economics and Informatics, 2009 - 2018
Faculty of Economics and Management CULS Prague, Kamycka 129, 165 00 Praha 6 - Suchdol