The Impact of Direct Income Transfers of CAP on Greek Olive Farms' Performance: Using a Non-Monotonic Inefficiency Effects Model

We analyse the impacts of direct income transfers on the technical efficiency of Greek olive farms. We use a production frontier function and a non-monotonic inefficiency effects model, which incorporates the influences of exogenous variables (subsidies, farm characteristics, etc.) on technical efficiency. The model is applied to 1995-2004 FADN data. The results show that direct transfers of the CAP had a negative and monotonic effect on technical efficiency, whereas the degree of specialisation had a non-monotonic effect on technical efficiency.