Total Factor Productivity Change of the Swiss Dairy Sector for the Mountain Region in the Period 1999 to 2008

Abstract

In view of a probable free trade agreement between Switzerland and the European Union in the agricultural and food sector and as a consequence of their actual low competitiveness in international comparison, Swiss dairy farms are under pressure to increase their productivity. In the present contribution I assess the total factor productivity (TFP) change in the period 1999-2008 of a balanced panel of 118 dairy farms located in the mountain region using the Malmquist productivity index. Particular attention is paid thereby to the issue of deflation quality for monetary input and output variables, and to the consideration of direct payments. The yearly average TFP growth rate of the sample of farms investigated amounts to 1% and is very close to the levels observed in European countries showing some similarities with Switzerland from an agricultural perspective. There seems thus to be some initial evidence that Swiss dairy farms located in the mountain region can keep up with their European counterparts in terms of TFP growth. However, due to the actual productivity gap existing between Swiss farms and their European counterparts, higher TFP growth would be necessary for the Swiss farms to increase their competitiveness in a European comparison.