New approach for the assignment of new European agricultural subsidies using scores from data envelopment analysis: Application to olive-growing farms in Andalusia (Spain)

More than 60% of olive-growing farms in Andalusia (Spain) would have negative returns without European agricultural subsidies. Agenda 2000 criteria imply that agricultural subsidies currently play the role of enhancing the production quality and the environmental and social values of agriculture. Although the necessity of the modulation of subsidies is stated, the EU regulations do not state which objective criteria should be used or how they should be measured, despite the fact that regulations demand objectivity in this measurement. This paper proposes an allocation system for subsidies which takes the Agenda 2000 criteria into account through their assignment according to Farm Efficiency which is calculated by decomposing overall DEA Scores, by means of internalizing the positive and negative externalities of agricultural activity. The paper analyzes the Type Efficiency of the Andalusian olive-growing sector by using the proposed indexes over a sample of 3000 real farms, taken from the administrative subsidy database. (C) 2007 Elsevier B.V. All rights reserved.