Efficiency and productivity growth of crop-oriented farms participating in the European Union farm credit program (Re. 2328/91)

Abstract

This paper investigates efficiency and productivity growth of Greek farms participating in the 1994 European Union (EU) farm credit program. The DEA methodology is used to measure technical efficiency and the Malmquist productivity index to measure and decompose productivity growth. The results indicate that the program has failed to increase average efficiency of crop oriented farms with the major source of inefficiency being primarily inefficient use of technology, and secondarily improper scale operation. The paper also investigates a number of factors influencing technical efficiency of farms using the Tobit approach. Among the factors showing a negative effect on technical efficiency is the value of investments incurred by the farm due to its participation in the 1994 farm credit program. The results show that total factor productivity growth for crop oriented farms decreased by about 5.4% per year, which is attributed mainly to an efficiency deterioration of about 4.9% per year and secondarily to a technical regress of about 0.6% per year, indicating that crop oriented farms failed to increase their productivity growth primarily due to the inefficient use of the new technology provided by the program.

JEL Classifications: Q10, Q12, Q16, Q19