Measures of farm business efficiency

ArticleinIndustrial Management & Data Systems 108(2):258-270 · March 2008with169 Reads
DOI: 10.1108/02635570810847617 · Source: DBLP
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.
    • "Several authors have argued that family farms are not as well prepared as co-operative and limited company farms to face market challenges because of a poor level of capital investments (Allen and Lueck, 1998). Cropping specialisation is a key factor that can directly infl uence the level of effi ciency and maximisation of output (Bojnec and Latruffe, 2008; Latruffe, 2010; Latruffe and Nauges, 2014), infl uencing the productive decision process on small farms. "
    Article · Apr 2015
    • "The The selection of input and output variables is in line with earlier literature (e.g., Bojnec & Latruffe, 2008). We define input variables which correspond to the land, labour and capital resources of farms. "
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    • "During the past few years, there have been many studies on development of data envelopment analysis (DEA) for measuring the relative efficiency of financial firms. In fact, implementation of a DEA model of constant returns to scale has been widely used in issues of financial analysis (Tarawneh, 2006; Bojnec & Latruffe, 2008; Liu, 2008; Liu et al., 2013). However, applying this model to analyze financial performance is not enough because of two reasons. "
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