The Sources of the Total Factor Productivity Growth in Lithuanian Family Farms: A Färe-Primont Index Approach

Abstract

The Lithuanian agricultural sector still features the processes of land reform, farm structure development, and modernisation. Accordingly, there is a need to utilise the benchmarking techniques in order to fathom the underlying trends and sources of efficiency and productivity. This paper therefore aims at analysing the productive efficiency and the total factor productivity in the Lithuanian family farms. The research is based on the Farm Accountancy Network Data covering the period of 2004-2009. The Fare-Primont Indices were employed to estimate and decompose the total factor productivity changes. Furthermore, the stochastic kernels were applied to analyse the distributions of the efficiency scores along with the econometric analysis which aimed at revealing the relationships of the environmental variables and the efficiency scores. The results do indicate that the technical efficiency was a decisive factor causing decrease in TFP efficiency for crop and mixed farms. Meanwhile, the scale efficiency constituted a serious problem for mixed farms. Indeed, these farms were the smallest ones if compared to the remaining farming types. Finally, the mix efficiency was low for all farming types indicating the need for implementation of certain farming practices allowing for optimisation of the input-mix.