AN EXAMINATION OF THE RELATIONSHIP BETWEEN AGRICULTURAL SUBSIDIES AND PRODUCTIVITY IN A CROP CONTEXT: A COUNTRY COMPARISON

Abstract

The agricultural sector has many functions such as food production, income generation, employment generation, input provision for industries and rural development. However, agricultural support policies have an important role in ensuring stability and sustainability in the agricultural sector as agriculture is subject to nature and has many characteristics such as low-price elasticities of supply and demand. All of the interventions made by the state in the agricultural sector in line with the objectives such as protecting producer incomes, securing food supply, increasing productivity by ensuring efficient use of resources and contributing to the country's output by increasing competitiveness are called agricultural support policies. After the global economic crisis in 1929, countries resorted to agricultural support policies to protect the producers whose income decreased after the contraction in demand. In the early days, export subsidies were introduced as a result of the excess supply created by the supports provided to ensure supply security, which increased the burden on the public budgets of countries. In order to put an end to this situation and to include agriculture in the free market mechanism, GATT meetings were organized and finally the agricultural agreement was signed in 1994. From this point of view, whether the PSE, GHDT, SCT and NPC supports included in the OECD support definition applied between 1992-2020 affect the productivity of wheat, maize, lentil, sunflower in Turkey, Mexico, EU, USA, South Africa, Russia and Australia is tested in the context of cointegration panel data analysis. The analysis reveals that there is a positive significant relationship between subsidies and productivity of the analyzed crops. The fact that the US and the EU, which implement high subsidies, have the highest coefficient ratio of the subsidy-productivity relationship shows the importance of subsidies in agriculture. On the other hand, the panel analysis revealed that Turkey does not get the desired yield from the products with the supports it applies.