Technical and Environmental Efficiency of Grapevine Production in Mendoza, Argentina

Abstract

As the Argentinean grapevine production systems have gained global visibility, the wine industry has been revitalized with a greater focus on enological quality, technology adoption, and export orientation. Although grapevine production has decreased 36% in a decade nationwide, the province of Mendoza accounts for 66% of grapevine production and 73.3% of the wine making. These changes are explained by relatively more technologically advanced production systems with a focus on quality and a higher decrease of vine hectarage in other provinces of Argentina. Small and medium size producers face scale limitations, financial constraints, and uneven access to quality irrigation water. There is a concern that vineyards fall short on their potential and that they are not optimizing their resources. The contribution of this dissertation is to unveil the underlying political and economic factors that affect the performance of vineyards and their effects on water resources. This dissertation departs from previous empirical applications by shedding light on the efficiency determinants of grapevine production and simultaneously accounting for agroecosystem characteristics and plot level information including irrigated water volumes in Mendoza, Argentina. Technical and environmental efficiency is assessed utilizing an unique dataset of 647 plots that includes, soil characterization, water volumes, and dummy variables for technology adoption and enological practices. The research considers that farmers jointly produce a desired output (grapevines) and an undesired output (saline hazard), both are dependent on the farmers’ location as well as their production systems and practices. The framework allows for estimation of the directional distance function following the most fair direction; that is, increasing grapevine production while decreasing salinity hazard. Results of the estimation confirm an existing trade-off relationship between grapevine production and saline hazard. The mean economic environmental efficiency is 0.869 corresponding a mean inefficiency of 0.131.