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Measures of farm business efficiency

Štefan Bojnec (Faculty of Management, University of Primorska, Koper, Slovenia)
Laure Latruffe (French Institute of Agricultural Research (INRA), Rennes, France)

Industrial Management & Data Systems

ISSN: 0263-5577

Article publication date: 14 March 2008

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Abstract

Purpose

The aim of this paper is to investigate technical, scale, allocative and economic efficiencies by data envelopment analysis (DEA) and stochastic frontier methods to provide a decision‐making tool and managerial implications in the measurement of farm business performance and efficiency.

Design/methodology/approach

Technical, scale, allocative and economic efficiencies are analyzed with the Farm Accountancy Data Network (FADN) sample for 13 farm business branches in Slovenia in the period 1994‐2003. DEA models are used with an output‐orientation, three outputs and four inputs. The non‐parametric DEA estimations are compared with a parametric stochastic frontier approach. The cluster analysis is used to identify three different farm business groups according to their performance.

Findings

The average technical, scale, allocative and economic efficiencies for the whole FADN sample over the analyzed period are relatively high (around or over 0.90), suggesting that, although the FADN sample contains very different farms, the latter have similar management practices, and are similarly able to make the best use of the existing technology. Five farm branches (crop, dairy, livestock using own feed, fruit, and forestry) are fully efficient with respect to all four analyzed efficiency measures, suggesting that these specializations have the best chance to compete on the European and world markets.

Originality/value

Studies of technical, scale, allocative and economic efficiencies are rare for transitional farm businesses, especially in Slovenia. The research contributes to the crucial issue of whether small family farm businesses might be able to compete on international markets, as Slovenian agriculture is characterized by such structures.

Keywords

Citation

Bojnec, Š. and Latruffe, L. (2008), "Measures of farm business efficiency", Industrial Management & Data Systems, Vol. 108 No. 2, pp. 258-270. https://doi.org/10.1108/02635570810847617

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited