The Effects of Investment Support on Performance of Farms: The Case of Application of the Rural Development Programme in Slovakia

The paper estimates the firm level impact of the Common Agricultural Policy (CAP) investment subsidies on gross value added, profits, employment, and productivity of farms in Slovakia, and evaluates the effectiveness of support provided through the Rural Development Programme.We employ a Propensity Score Matching Difference-in-Differences econometric approach on a database of commercial farms for the period 2006-2015.The results of this paper show that the farm investment support stimulated growth of gross value added, farm profits, and employment in the agricultural sector, while it reduced labour productivity.Investment support helped to maintain rural jobs, which occurred partly at the expense of labour productivity.The paper stresses high deadweight costs of investment support within the CAP, which should be considered when planning and implementing new CAP interventions.