Do Grassland Conservation Subsidies Influence Farm Efficiency? Evidence from a French Natural Experiment

Abstract In this paper, we investigate the impact of an exogenous source of income support variation related to Less Favored Areas (LFA) and the grassland premium (PHAE) on farms’ technical efficiency (TE), environmental efficiency (EE) in France. We exploit the 2015 CAP reform, which serves as a natural experiment since it affects three groups of farms differently. We employ a combination of difference-in-differences and inverse propensity score weighting, comparing farms that benefited from an increase in LFA payments (winners) to farms that did not experience a change (neutrals). We also compared farms that suffered from the loss of the grassland premium (losers) to neutral farms. Our findings suggest that the variation in income support has led to a reduction in TE without significant effect on EE. Citation Diop, T. B., & VEDRINE, L. (2025). Do Grassland Conservation Subsidies Influence Farm Efficiency? Evidence from a French Natural Experiment (v01). BrightSpace Horizon Europe project Grant Agreement No. 101060075. https://doi.org/10.5281/zenodo.19100511 ---------------Funding acknowledgement BrightSpace is funded by the European Union. Grant Agreement No. 101060075. Views and opinions expressed are those of the authors only and do not necessarily reflect those of th European Union or the European Commission. Neither the European Union nor the granting authority can be held responsible for them. UK Research and Innovation Project Code: 10047415 https://gtr.ukri.org/projects?ref=10047415 Legal notice This document was produced under the terms and conditions of Grant Agreement No. 101060075 for the European Commission. It does not necessary reflect the view of the European Union and in no way anticipates the Commission’s future policy in this area. The European Commission is not liable for any consequence stemming from the reuse of this publication. © BrightSpace, 2025 The reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CCBY 4.0) licence (https://creativecommons.org/licenses/by/4.0/). This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the BrightSpace consortium, permission may need to be sought directly from the respective right holders. Project information BrightSpace Horizon Europe project Grant Agreement No. 101060075 https://cordis.europa.eu/project/id/101060075CALL: Innovative governance, environmental observations and digital solutions in support of the Green DealWORK PROGRAMME Topic ID: HORIZON-CL6-2021-GOVERNANCE-01-12 EU agriculture within a safe and just operating space and planetary boundaries BrightSpace Project coordination: Wageningen Economic Research, The Hague, NL Contact: brightspace.wser@wur.nl | Website: www.brightspace-project.eu Project duration: 1 November 2022 – 31 October 2027