Productivity change in Lithuanian family farms with the sequential technology

Abstract

The sequential Malmquist-Luenberger productivity index was employed to assess the sources of changes in the total factor productivity in Lithuanian family farms. The research sample encompasses 200 family farms reporting to the Farm Accountancy data Network. The sequential Malmquist-Luenberger index was decomposed by taking into account scale efficiency change and variable returns to scale technology. The obtained efficiency scores suggest that years 2006 and 2009 were those of the most inefficient farming activity. Analysis of the scale efficiency scores suggested that the mixed farming should expand its operation scale in order to maintain the economic viability and competitiveness. The sequential Malmquist-Luenberger productivity index suggested that the TFP had decreased by some 2.9% throughout 2004–2009. The technical change component stagnated in 2009, yet remained the most important factor of TFP growth accounting for increase of some 14% during 2004–2009. The decreasing pure technical efficiency, however, reduced the TFP by 16%. The scale efficiency change did not play an important role. Innovative decision making units – family farms – were identified in terms of distance function and productivity index values.