Influence of government financial support on the profit of farms

Abstract

When evaluating means of support, it is important to establish whether its benefit goes to the business, for which it is intended. It is supposed that benefit can be expressed in profit. No one doubts that support can result in increase of income, but it also can increase business persons/farmers’ costs, which can result in redistribution of support among other market players. The article evaluates the effect of financial support to agriculture on Lithuanian farmers’ profit. It was established that the effect of production subsidies and investment support on profit (excluding production subsidies) is rather weak but their effect on profit (with subsidies) is greater, which gives reasons to believe that both production subsidies and investments help to cover expenses and result in a greater income however farmers do not receive any real benefit out of such means of support. The obtained benefit is redistributed among other market players – due to the possibility to cash in from the support, received by farmers and as the result of more favorable negotiating positions. On the other hand, the influence of the support to dissemination of information on the farmers’ income, taking into consideration a year’s delay, is very significant. As the state strives for increasing the farmers’ competitive abilities, compared with other means of support, it is most beneficial to provide support to the dissemination of information, since the buy-off of the support is the biggest among all the types of support (compared to other forms of support, i. e. the investment support and the support for production (subsidies), which are provided directly to the farmer). The support to dissemination of information is efficient but it also has negative traits, i. e. greater administration costs than those of other means and the danger of provision of fictitious support because of low tangibility

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