Assessing the economic effects of agri-environmental schemes on farm input use

. This study assesses the economic impacts of agri-environmental schemes (AES) on farm-level input expenditures, particularly fertilizers, crop protection products, and energy, in Hungary from 2014 to 2020. Employing advanced econometric methodologies, including Synthetic Difference-inDifferences (SDID), Synthetic Control (SC), and traditional Difference-in-Differences (DiD), the analysis addresses the complex challenges posed by staggered AES adoption and significant farm-level heterogeneity. The findings indicate no statistically significant overall change in expenditures for fertilizers, crop protection, and energy. Nonetheless, detailed temporal analysis reveals nuanced dynamics. During the initial phases of AES implementation, transitional inefficiencies are evident, indicating adaptation challenges and associated costs as farmers adjust to new environmental requirements. These initial costs stem from administrative burdens, the need for training, and investments in sustainable practices such as precision agriculture and integrated pest management (IPM). Over subsequent years, the results exhibit stabilization or slight increases in input expenditures rather than substantial cost savings. Such trends suggest that while AES may encourage environmentally sustainable farming practices, the expected economic benefits from reduced inputs—due to input substitution or increased efficiency—may not be immediate or uniformly achievable. Indeed, more precise and environmentally-friendly alternatives to traditional chemical inputs, despite their ecological advantages, can incur higher short-term costs. Further analysis highlights considerable heterogeneity in AES impacts across different farm sizes and adoption timing. Larger, more technologically advanced farms display a relatively smaller incremental cost increase, benefiting from economies of scale and superior resource access, yet these differences are minor and statistically inconclusive. Early adopters, defined as farms participating in AES from the scheme’s initial stages, showed no systematic economic advantage or disadvantage compared to later adopters, indicating a consistent adaptation pattern across all participating farms. Robustness checks, including random treatment falsification tests and analyses on never-treated farms, reinforce the credibility of the findings, affirming that observed AES impacts genuinely reflect causal relationships rather than selection biases or confounding factors. The study concludes that the complex interplay between policy design, farm structure, market dynamics, and adaptation processes can obscure immediate economic outcomes. Therefore, it underscores the need for more tailored AES interventions that consider farm-specific constraints, transitional costs, and longterm adaptation dynamics. Additionally, integrating broader sustainability indicators—biodiversity, soil quality, and resilience metrics—could yield a more comprehensive evaluation of AES efficacy. This research contributes important empirical evidence to ongoing discussions regarding the economic viability and environmental effectiveness of AES within diverse agricultural landscapes. Policymakers are encouraged to account for initial adaptation phases, support targeted technological and management innovations, and embrace regionally customized strategies to optimize both ecological and economic outcomes of AES policies.