Evading Farm Support Reduction Via Efficient Input Use: The Case of Greek Cotton Growers

Abstract

Utilizing a stochastic frontier approach, this paper examines the importance that input-oriented technical and scale efficiency may have for Greek cotton farmers in the context of the current EU cotton policy. To that end, a sample of cotton-growing farms in the representative cotton -producing county of Karditsa (central Greece) is empirically analyzed. The results suggest that the farms examined exhibit decreasing returns to scale and they are both scale and technically inefficient. Moreover, elimination of these inefficiencies could result in considerable gains; the cotton farmers examined could reduce production costs by 46.0%, by becoming both technically and scale efficient. Additionally, we estimate that if cotton farms in the area examined were technically and scale efficient the intervention price reductions (co-responsibility levy) imposed by the EU for excessive cotton production would be smaller for all Greek cotton growers.