The Impact of Government Support on Agricultural Productivity: A Regional Perspective

Introduction. Agriculture has traditionally been a subsidized sector, including in terms of ensuring food security and the social development of rural areas. The aim of the article is to assess the impact of government subsidies on total factor productivity in agriculture, taking into account regional heterogeneity. Materials and Methods. The object of the study is the Russian regions. Based on a balanced panel of data for 82 subjects of the Russian Federation for 2015–2022, the first stage involved an econometric assessment of total factor productivity: a production function was constructed reflecting the dependence of agriculture output on production factors. To analyze the robustness of the results, Cobb–Douglas, Translog, and stochastic frontier production functions were applied; output indicators included agricultural production in current and constant prices, as well as the gross value added of the agricultural sector in constant prices. In the second stage, the impact of subsidy amounts on total factor productivity in agriculture was evaluated. Results. Based on econometric modeling, it has been determined that in the year of subsidization, transfers from the budget do not affect the total factor productivity in agriculture. A decline in total factor productivity a year later (with an increase in the volume of subsidies) corresponds to the theory of the negative impact of transfers on agricultural productivity, as producers are less motivated to optimize costs and invest in their activities. An increase in total factor productivity two years after receiving government support is associated with higher agricultural productivity: thanks to the subsidies, producers can increase their own financial resources, gain access to credit, and reduce investment risks in certain additional areas of production. Discussion and Conclusion. The study confirmed the hypothesis of the differing impact of subsidies depending on the time lag. The results obtained are of practical value in the context of discussing the effectiveness of state agricultural policy in terms of the direction and volume of government support, taking regional heterogeneity into account.