Technical Efficiency of Agriculture in the European Union and Western Balkans: SFA Method

Abstract

Improvements in productivity and efficiency, together with agricultural modernization, are crucial in the process of future sustainable development. As Western Balkan (WB) countries are in the process of integration into the European Union (EU), the importance of agricultural efficiency in an economic and environmental context and the actuality of the problems of the agricultural sector are very important. In that context, the paper’s main goal is to examine agriculture’s technical efficiency in the EU and WB. The additional goal is to group analyzed countries by agricultural performances. A stochastic frontier analysis (SFA) is used to calculate the technical efficiency of agriculture. Results have shown a significant difference in technical efficiency between WB and the EU. Furthermore, the cluster analysis has indicated the connection between overall economic development and agricultural development, partially “deformed” by agri-environmental and climate conditions. The exogenous factors do not have a crucial influence on the overall technical efficiency of agriculture in observed countries, indicating that the endogenous factors must be improved. The paper impacts recommendations for optimizing the use of inputs and improving the educations of farmers in WB countries to achieve economic and environmental goals.

Keywords

• technical efficiency
• agriculture
• SFA method
• Western Balkans
• European Union