Estimating persistent and transient technical efficiency and their determinants in the presence of heterogeneity and endogeneity

We develop an estimation procedure that generates consistent estimates of the technology parameters, long-run (persistent) and short-run (transient) technical inefficiencies and the marginal effects of their determinants for the stochastic frontier model developed by Colombi et al. (2014, Journal of Productivity Analysis 42, 123) and Kumbhakar et al. (2014, Journal of Productivity Analysis 41, 321). Our approach accounts for three sources of potential endogeneity: (i) unobserved heterogeneity; (ii) simultaneity of input use with both types of technical efficiency; (iii) potential correlation of the noise term with the regressors. Using this approach we examine the effect of direct payments and farm size on the persistent and transient technical efficiency of French crop farms before and after the European Union's Common Agricultural Policy decoupling reform of 2003. Our results show that subsidy payments per hectare of utilised agricultural land had a significant positive effect on persistent technical efficiency and a significant negative effect on transient technical efficiency during the period before decoupling. For the period after the reform, the effect of subsidies is found to be significantly negative for persistent technical efficiency and insignificant for transient technical efficiency. The overall effect of subsidies on technical efficiency is found to be negative in both periods, albeit substantially lower in the period after decoupling. The effect of farm size on technical efficiency is found to be significant only for the period prior to the reform: it reduced persistent technical inefficiency but increased transient technical inefficiency during that period

Conceptual System Dynamics and Agent-Based Modelling Simulation of Interorganisational Fairness in Food Value Chains: Research Agenda and Case Studies

© 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/)System dynamics and agent-based simulation modelling approaches have a potential as tools to evaluate the impact of policy related decision making in food value chains. The context is that a food value chain involves flows of multiple products, financial flows and decision making among the food value chain players. Each decision may be viewed from the level of independent actors, each with their own motivations and agenda, but responding to externalities and to the behaviours of other actors. The focus is to show how simulation modelling can be applied to problems such as fairness and power asymmetries in European food value chains by evaluating the outcome of interventions in terms of relevant operational indicators of interorganisational fairness (e.g., profit distribution, market power, bargaining power). The main concepts of system dynamics and agent-based modelling are introduced and the applicability of a hybrid of these methods to food value chains is justified. This approach is outlined as a research agenda, and it is demonstrated how cognitive maps can help in the initial conceptual model building when implemented for specific food value chains studied in the EU Horizon 2020 VALUMICS project. The French wheat to bread chain has many characteristics of food value chains in general and is applied as an example to formulate a model that can be extended to capture the functioning of European FVCs. This work is to be further progressed in a subsequent stream of research for the other food value chain case studies with different governance modes and market organisation, in particular, farmed salmon to fillet, dairy cows to milk and raw tomato to processed tomato.Peer reviewedFinal Published versio

Land Pricing Model: Price Re-evaluation Due to the Erosion and Climate Change Effects

The aim of this study is to derive and apply the hedonic approach for determining and updating official land prices with respect to e.g. the impact of climate change that has occurred in the conditions of the Czech Republic in recent years. Pricing using the hedonic method is based on capturing individual factors separately. The evaluated soil ecological unit code consists of a 5-digit numerical code, which expresses the affiliation to the climate region (0-9, see table 1), the main soil unit (0-78), the slope of the land and the orientation to the point of the compass (0-9) and also the depth of the soil profile and skeletality (0-9). The derived hedonic pricing model is estimated using heteroscedasticity corrected estimator. The fitted model shows considerably high explanatory power and together with high parameter significance for majority of dummy variables (soil characteristics) as well as with theoretical and logical consistency represent a tool for new official land price settings in the process of land reevaluation due to the erosion and climate change effects

Technological heterogeneity, technical efficiency and subsidies in Czech agriculture

This paper deals with an analysis of technological heterogeneity and technical efficiency in individual sectors of Czech agriculture after the EU enlargement in 2004. A parametric approach was used – Stochastic Frontier Analysis (SFA) to address the research questions. Specifically, it is employed the Random Parameter Model specification, in which sector dummies are used to capture the intersectoral as well as intrasectoral differences in technology. The results show there is significant heterogeneity among the studied sectors (i.e., combined, plant, animal and other production). The analysis showed that Capital and Material are being substituted more and more for Labour in all sectors, especially in animal production. This result is to be expected, as the technology in this sector is labour-saving. However, it was found out that land elasticity is quite low in plant production and combined production; since Land is a production factor that significantly determines the level of final output, this result is quite strange. One possible explanation may be the policy of distributing subsidies among farmers, when the land is kept but used in a more extensive way. The intrasectoral differences in technology are statistically significant for all inputs. Average technical efficiency is highest in other production and lowest in animal production, while it is approximately at the same level in plant production and combined production. It was discovered that diversification (combined production) of activities lowers the level of technical efficiency compared to specialisation (plant production), but on the other hand it does allow for alleviation of the negative impacts of specialization (animal production) by optimizing the production program. Finally, the analysis did confirm a statistically significant positive relationship between SAPS subsidies and technical efficiency. Organic farming has a negative impact on technical efficiency and the influence of labour force quality is positive. The statistical significance of TOP UP subsidies as well as the localization of the company to LFA have not been proved

Sources of Economical Growth in the Czech Food Processing

The paper attempts to assess the development path of the Czech food processing and to identify the presence of idiosyncratic developments in industries. We elaborate it by using a fi tted production function for the construction of TFP and by decomposing TFP into a scale effect, a technical change effect and an efficiency effect for total food processing and its selected branches. The results suggest that despite more than one decade of transition, serious adjustment problems exist, including problems on the capital market. Furthermore, contrary to the large differences among firms in the whole sample, the various sectors are rather homogeneous. TFP shows that although individual sectors have a few frontrunners, the majority of companies perform quite poorly. The scale effect is relatively small in food processing. Technical change has contributed positively to TFP in recent years, and the efficiency effect varies rather strongly. Whereas scale effect and technical change have a similar pattern across industries, the efficiency effect differs significantly. There is also some indication that the efficiency effect is affected by different sources. Finally, in addition to systemic effects, industry developments are characterized by idiosyncratic factors, especially in the Dairy industry.transition, TFP (Total Factor Productivity), SFA (Stochastic Frontier Analysis), food processing, efficiency, Czech Republic

Technical Efficiency in the European Dairy Industry: Can We Observe Systematic Failures in the Efficiency of Input Use?

The paper provides findings on the technical efficiency of the European dairy processing industry, which is one of the most important subsectors of the food processing industry in the European Union (EU). The ability to efficiently use inputs in the production of outputs is a prerequisite for the sustainability and competitiveness of the agri-food sector as well as for food security. Thus, the aim of this paper is to provide a robust estimate of technical efficiency by employing new advances in productivity and efficiency analysis, and to investigate the efficiency of input use in 10 selected European countries. The analysis is based on two-stage stochastic frontier modelling incorporating country-specific input distance function (IDF) estimates and a meta-frontier input distance function estimate, both in specification of the four-component model, which currently represents the most advanced approach to technical efficiency analysis. To provide a robust estimate of these models, the paper employs methods that control for the potential endogeneity of netputs in the multi-step estimation procedure. The results, based on the Amadeus dataset, reveal that companies manufacturing dairy products greatly exploited their production possibilities in 2006–2018. The dairy processing industry in the analysed countries cannot generally be characterized by a considerable waste of resources. The potential cost reduction is estimated at 4–8%, evaluated on the country samples mean. The overall technical inefficiency (OTE) is mainly a result of short-term shocks and unsystematic failures. However, the meta-frontier estimates also reveal a certain degree of systematic failure, e.g., permanent managerial failures and structural problems in European dairy processing industry

Market Imperfections within the European Wheat Value Chain: The Case of France and the United Kingdom

The focus of this paper is on the analysis of market imperfections in the French and U.K. wheat value chains. We used mark-up and mark-down models and stochastic frontier analysis to estimate the degree of market imperfections in two completely different wheat-to-bread chains for two stages/sectors—milling and baking. Our results reveal some degree of market imperfections within the input and output markets for both the milling and baking sectors in France and the United Kingdom. However, the abuse of bargaining power is especially pronounced in the input market for the second stage of wheat processing, particularly in the French baking sector. However, we did not observe the expected positive association between the degree of market imperfections and company size except for a group of middle, large, and very large companies within the millers’ input market. Small companies indicate considerably high values of “Lerner”/Lerner indices, suggesting a benefit from other sources of competitive advantage (such as quality, niche markets, etc.)