The effect of total subsidies under the European Union common agricultural policy on total input costs

Today, countries use a significant amount of their national resources to support the agricultural sector. The common agricultural policy, which is especially implemented in the EU, received a share of 90% from the community budget in the first years of its establishment, while today it receives a share of 35%. It is important to use agricultural policies, which have such a large share from the common budget created with the contributions of the member countries, effectively and efficiently. Otherwise, the opportunity cost of these resources allocated to agriculture will be high for the relevant society. Agricultural subsidies indirectly or directly affect various parameters, especially farm profitability, technical productivity, agricultural production and input costs used in agricultural production, through various mechanisms. Cost perspective studies in the literature there are sufficient examples about that subsidies increase fertilizer and crop protection expenditures with land value and land rental prices. Thus, the thesis aimed to contribute to filling the gap in the literature by focusing on a variable (total input costs) that previous studies had almost not focused on. In the thesis the effect of agricultural supports of 12 EU member states within the scope of CAP on total input costs between 1989 and 2019 was investigated. The variables used in the study were obtained from the FADN (Farm Accounting Data Network) database. In the model created using the panel data analysis method, the dependent variable total input costs (€), the independent variable total subsidies (€) and finally the total output (€/farm) were selected as the control variable. According to the results, increases in total subsidies and total output increase total input costs. The results obtained support the results of other studies in the literature in the cost perspective.