Effects of government supports and credits on Turkish agriculture

Purpose: Domestic supports on Turkish agriculture have substantially increased over the past decade while empirical evaluation of their output impact is limited. Also, the existing literature often neglects potential spatial spillover effects of agricultural policies or subsidies. The purpose of this paper is to quantify the direct and spillover effects of Turkish agricultural domestic measures and agricultural credits use on the added agricultural value. Design/methodology/approach: This study applied a spatial panel model incorporating spatial interactions among the dependent and explanatory variables to evaluate the impact of government support and credit on Turkish agricultural output. A provincial data set of agricultural output values, input factors and government subsidies from 2004 to 2014 was used to model the spatial spillover effects of government supports. Findings: Results show that a one percent increase in agricultural credits in a given province leads to an average increase of 0.17 percent overall in agricultural value-added per hectare, including 0.05 percent from the direct effect and 0.12 percent from the spillover effect. Contrary to agricultural credits, a one percent increase in government supports in a province generates a mixed direct and spillover effects, resulting in an overall reduction of 0.13 percent in agricultural value-added per hectare in Turkey. Research limitations/implications: This study could be extended by controlling for climate, biodiversity and investment factors to agricultural output in addition to input and policy factors if such data were available. Originality/value: This study fills the gap in the literature by determining the total effect, including direct and spatial spillover effect, of domestic supports and credits on Turkish agricultural value. The findings provide crucial information to decision makers regarding the importance of incorporating spatial spillover effects in the design of agricultural policy.