Environmental efficiency, productivity and public funds: The case of the Italian agricultural industry

• The present paper aims at evaluating the effect of regional policies in the agricultural field.
• Regional systems are evaluated through the Directional Output Distance Function (DODF).
• The DODF approach considers pollutant emissions as undesirable output.
• Results show that there is a link between public policy and environmental performance of agricultural systems.

The present paper aims at evaluating the effect of regional policies in the agricultural field, with a specific focus on the Italian case. Provincial systems are evaluated through the Directional Output Distance Function (DODF) that is an extension of the Data Envelopment Analysis technique (DEA). The DODF approach allows authors to consider pollutant emissions as undesirable output and to redefine productivity and efficiency indicators, considering also the contraction of emissions from the fertilizer’s use.Results show that there is a considerable difference for environmental performances among Italian regions and that productivity estimates differ when emissions are included. The amount of public funds granted by the Rural Development Programs (RDP) over the period 2000–2006 is in general assigned to the more disadvantaged areas. Nevertheless, obtained results suggest that TFP growth does not exactly follow the direction of public funds and some policy’s implications are provided.