RESEARCH PAPER
HETEROGENEITY IN THE LEVEL OF TECHNICAL EFFICIENCY OF FARMS IN THE EUROPEAN UNION REGIONS AND ITS RELATIONSHIP TO INDEBTEDNESS
More details
Hide details
1
Poznań University of Economics and Business
Submission date: 2024-07-02
Final review date: 2024-09-09
Acceptance date: 2025-01-09
Publication date: 2025-03-31
Zagadnienia Ekonomiki Rolnej / Problems of Agricultural Economics 2025;382(1):57-84
KEYWORDS
JEL CLASSIFICATION CODES
TOPICS
ABSTRACT
Aim:
The purpose of the study is to determine the relationship between the level of farm indebtedness
and their technical efficiency
Material and methods:
In the paper Greene’s “true” fixed effects model and regional Farm Accountancy
Data Network data are used to calculate efficiency and its determinants in the stochastic frontier
analysis framework.
Results:
The results indicate that higher dependence on external capital deteriorates technical efficiency
level. The existence of increasing returns to scale in the EU agriculture and important role of
structural factors (region-specific heterogeneity) is proven as well. The latter disturbs the traditional
division between ‘new’ and ‘old’ Member States in terms of agricultural production efficiency.
Conclusions:
Assuming that debt increases as a consequence of the investments, the results may
indicate overinvestment. It may be caused by the ease of obtaining loans on preferential terms or by
the need to finance green investments which do not translate into production growth. This conclusion
reveals the need to better address credit-based support instruments. On the other hand, investments,
in particular those of innovative nature, may disturb standard production process and increase efficiency
only in the long run.