Impact of CAP Direct Payments on French Farms’ Managerial Efficiency

This paper investigates the relationship between CAP direct payments and managerial efficiency for French crop and beef farms. Managerial efficiency scores are calculated using a four-step approach that allows to disentangle managerial inefficiency from other technical inefficiency components, notably what is due to unfavourable environment conditions. Then managerial efficiency scores are regressed over a set of explanatory variables, including CAP direct payments. Our empirical application, based on individual farm data and meteorological data at the municipality level for the year 2000, shows that there is a substantial component of inefficiency that is due to unfavourable conditions. Moreover, there is a significant negative relationship between managerial efficiency and CAP direct payments for crop farms, but a positive relationship for livestock farms. The type of payments also matter, with area-based and Less Favoured Area payments reducing crop farms’ efficiency but headage and agri-environmental payments increasing beef farms’ efficiency.