Productivity growth on Finnish grain farms from 1976 2006: a parametric approach

S Myyrä,P Pihamaa,T Sipiläinen

doi:10.23986/afsci.5959

Abstract

In the long term, productivity and especially productivity growth are necessary conditions for the survival of farms and the food industry in Finland. The natural handicap and small farm size are challenges, but farmers are further challenged by the decoupling of supports and their transformation into direct income payments. Additionally, farmers actions are limited by some institutional settings that substantially reduce incentives to improve productivity. Technical progress was found to drive the increase in productivity on grain farms in Finland. The scale had only a moderate effect and for the whole study period (19762006) the effect was close to zero. Total factor productivity (TFP) increased, depending on the model, by 0.61.7% per year. The results demonstrated that the increase in productivity was hindered by the policy changes introduced in 1995. The cumulative increase in TFP over the study period was at the same level as the measured yearly changes in TFP. The results highlight the nature of grain farming in Finland as well as the challenges in simultaneously taking into account the general trend and yearly variation in TFP.;

Highlights

Finns prefer Finnish food, most Finnish products have to compete on the market with foreign alternatives at a fairly uniform price level
For long-term development, the time-trend model suggests faster Total factor productivity (TFP) growth: the annual growth rate calculated from sample means indicates 1.7% annual growth for the time trend (TT) model and
The annual variation in TFP growth is large in the general index (GI) model, because it allows more flexibility with respect to year-to-year changes in productivity

Summary

Introduction

Finns prefer Finnish food, most Finnish products have to compete on the market with foreign alternatives at a fairly uniform price level. We apply both time trend and general index methods in order to capture the long- and short-term variation in technical change. Productivity mainly grows because of technical progress, which averages 1.7% per year in the time trend (TT) model and 0.8% per year in the general index (GI) model and is most rapid in the largest farm classes and in the south of Finland.

Results

Conclusion