Structural efficiency in Lithuanian family farms

Abstract

Along with firm-specific technical inefficiency, sector-specific structural inefficiency might induce losses in productivity. This paper therefore aims to identify the trends in structural efficiency in Lithuanian family farms. Specifically, the four farming types are considered, namely cereal farming, field cropping, dairying, and mixed farming. Farm-level data from Farm Accountancy Data Network are used for the analysis. The research period spans over the years 2004–2011. The trends in technical and scale efficiency are presented. Furthermore, the prevailing returns to scale are discussed thus offering insights into the most productive scale size and deviations from it in Lithuanian family farms. Finally, the dynamics in structural efficiency are discussed. The results indicate that the aggregate output of certain farming types could be augmented by some 20–25% due to reallocation of inputs among farms. Anyway, technical inefficiency remains the major driver of structural inefficiency.