Efficiency and total factor productivity in post-EU accession Hungarian sugar beet production.

Abstract

This paper analyses efficiency and total factor productivity (TFP) in Hungarian sugar beet production applying non-parametric frontier techniques. For 2004 and 2005 efficiency and TFP are calculated by Data Envelopment Analysis (DEA) and by a Malmquist index respectively. Between 2004 and 2005 the average technical efficiency was very stable, around 0.80 for CRS efficiency and 0.87 for VRS efficiency, suggesting that in both years farms were similarly clustered towards the frontier. The analysis of returns to scale reveals that during both years half (48%) of the sugar beet growers were operating under increasing returns to scale. In the two analysed years changes occurred between decreasing returns to scale and scale efficient farms, when the first increased from 32% to 37%, while the second decreased from 20% to 15%. In 2004 the highest technical efficiency can be observed in Szerencs district followed by Kaba district and then Szolnok district, while the efficiency rating changed in 2005 when the most efficient district was Kaposvar, followed by Szerencs and Petőhaza. Between years TFP increased by 9%. The main reason for the observed TFP increase was technical progress of 8%, while technical efficiency played a limited role in improving the performance of sugar beet production. At the same time there was a clear convergence which can be identified and thus improving efficiency scores among individual holdings. Although in the analysed period TFP increased, our empirical results have revealed pure technical inefficiency. In the first three most efficient sugar beet production districts the technical efficiency decreased while in the two least efficient districts technical efficiency increased and they became more homogenous to the frontier compared to the former three districts in 2005.