The Effects of Diversification Activities on the Technical Efficiency of Organic Farms in Switzerland, Austria, and Southern Germany

Abstract

The diversification of farms can be a result of multifunctional farming, however, in some cases at the cost of lower farm efficiency. In our paper we investigate the influence of para-agricultural diversification on productivity and the technical efficiency of organic farms in Austria, Switzerland, and Southern Germany. We show the benefits and drawbacks of diversification for organic farms, which go beyond the core agricultural production (para-agriculture). We do this by estimating a Stochastic Frontier (SF) combined with a metafrontier model. The data-set consists of bookkeeping data with 1704 observations in the years 2003 to 2005. Para-agricultural diversification activities have a significant effect on both productivity and technical efficiency of organic farms: The farm output in Austria and Switzerland is positively influenced by diversification, whereas we observe a rather small effect in Southern Germany. On the other hand, diversification can reduce farms' technical efficiency, as it is the case in Switzerland and Germany. Furthermore, our study confirms previous results that agricultural subsidies significantly influence the technical efficiency of organic farms. We also show expected changes of input use driven by increased farm diversification.

The Role of Knowledge in Sustainable Agriculture: Evidence from Rice Farms’ Technical Efficiency in Hanoi, Vietnam

“…SFA has been used to analyze the efficiency of rubber farms [16], soybean farms [17], citrus farms [18], mixed organic farms [19], and, especially, rice farms [20][21][22][23][24][25][26][27][28]. In particular, Battese and Coelli [26] proposed a time-varying SFA model for panel data to analyze 38 paddy rice farmers from an Indian village between 1975 and 1985.…”

Assessing the Impacts of Land Consolidation on Agricultural Technical Efficiency of Producers: A Survey from Jiangsu Province, China

“…Technical efficiency can be analyzed by using parametric or non-parametric methods. Both methods have their strengths and weaknesses [62][63][64][65]. Given the wide scope of factors of production considered and the relatively small sample size, regression analysis using the translog production function may have low efficiency and high uncertainty.…”

The Impact of Non-Agricultural Diversification on Financial Performance: Evidence from Family Farms in Italy

“…In this evolving scenario, a significant body of literature has explored the drivers affecting the adoption of diversification activities [5,[15][16][17] as well as their intensity, i.e., the level of involvement in on-farm non-agricultural activities [4] while little attention has been given to the impact of such adoption on the technical efficiency [9,18,19], economic viability [1], and financial performance of farms [16,20].…”

“…There is a wide literature that has investigated the determinants of diversification and has shown the relationship between the adoption of diversification activities and the socio demographic, economic, and geographical characteristics of farm holdings and farm households, see reference [5] for a summary of the main findings. Other studies have investigated the factors affecting the farmers decision regarding the workdays dedicated to non-agricultural activities [5], the capacity of diversification to generate new jobs [39], the technical efficiency [9,18,19], and the economic viability [1] of diversified farms.…”