Comparative analysis of productivity developments of agricultural sector in Baltic States : assessing the impact of subsidies on products

Abstract

The paper extends the knowledge on the dynamics of productivity in agriculture and its relashionship with subsidies on products. The aim of the paper is to compare dynamics in single factor productivity of agricultural sectors in Estonia, Latvia and Lithuania after having introduced CAP subsidies on products and to assess the impact of subsidies on products on the productivity in these three Baltic States. Using the data of Economics accounts for agriculture (Eurostat) labor, fixed capital, and energy single factor productivities in three Baltic countries as well as in the whole EU were calculated based on gross value added. The results reveal that the level of labor and energy productivity is lower in three Baltic States compared to the levels in the EU. Agricultural sector in Estonia seams to be revealing rather important labor productivity gains compared to Latvian and Lithuanian agricultural sectors from 2009 onwards and is of a higher level during the whole period under analysis (2003-2012). Fixed capital productivity in the EU and three Baltic countries is converging. The real productivity gains and its rather stable development are identified in Estonia, when in Lithuania productivity gains are partially overvalued by rather high gross value added dependency on subsidies on products and in Latvia productivity is lagging due to structural problems and investment deficiencies. It seems that in Latvia and Lithuania agricultural policies should actively target productivity in order to mitigate the risks of negative impact of subsidies on products on productivity.