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Author(s): Nikola Trendov, Kehinde Olagunju, Mile Pesevski

Title: Are agricultural subsidies causing more harm than good? Evidence from agricultural sector of Republic of Macedonia

Source: International Scientific Days 2016. The Agri-Food Value Chain: Challenges for Natural Resources Management and Society

Document Type: Scientific paper

ISBN: 978-80-552-1503-7


Publisher: Slovak University of Agriculture in Nitra

PY, pages: 2016, 75-82

Published on-line: 2016-06-24

Language: eng

Abstract: Over the years in the Republic of Macedonia, agricultural subsidies are enlisted as determinant of farm incomes, farm productivity and the overall national agricultural sector evident in her national budgets, grants and aids from the European Union. However, there is yet empirical findings that evaluate the impact of agricultural subsidy on the performance of agricultural sector of the Republic of Macedonia. Therefore, this paper aimed at examining the causal relationship between agricultural subsidy and performance of agricultural sector, using time series data for the study obtained from EUROSTAT and World Bank and analysed using Granger Causality and LM tests. Our main findings are clear: governmental subsidies do not cause the agricultural development, but agricultural development causes governmental subsidies. Thus unidirectional causality has prevailed between governmental subsidies and agricultural development in the Macedonian economy. Also, regression analysis was conducted to examine the statistical association between the agricultural production and governmental subsidies in the short-run. We found that though the relationship between subsidies and agricultural development was not significant, subsidies had a negative impact on agricultural productivity. This clearly reflects the inefficiencies of government subsidization policy of the agricultural production. We recommend that the design of subsidy programmes should be driven by real needs of agricultural sector while proper monitoring of the disbursements and the use of funds should be ensured.

Keywords: subsidies, agricultural sector, casual relationship, Republic of Macedonia

JEL Classification: C01, C12, C32, C53, Q14, Q18

Rights: Open Access :: Creative Commons Attribution 4.0 Licence
Creative Commons License
Toto dielo je publikované pod/This work is licensed under a Creative Commons Attribution 4.0 International License.