Surveying the Effect of Subsidies on Total Factor Productivity in Agricultural Sector

One of the sustainable ways for reaching to the growth in agricultural sector is increasing total factor productivity in this sector. So this way was always paid attention to policy makers. Due to subsides objective law, subsides payment to agricultural products will be changed. These changes may affect agricultural products demand and also may affect total factor productivity in this sector. So in this paper, the effect of subsides payments to agricultural products on total factor productivity shocks in agriculture sector during 1990-2008 with the use of Johansen test and vector error correction model is surveying. For Purpose of Calculating the total factor productivity shocks, Hoderick Prescott filter is used.
Results show that decreasing in subsides cause decreasing in positive productivity shocks and this affect is asymmetry and in inverse side. Also the effect of subsides on negative shocks is bigger than positive shocks.
JEL Classification: C22, Q1, Q28