How Can Overinvestment in Farms Affect Their Technical Efficiency? A Case Study from Poland

Jagoda Zmyślona (), Arkadiusz Sadowski and Krzysztof Piotr Pawłowski
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Jagoda Zmyślona: Faculty of Economics, Department of Economics and Economic Policy in Agribusiness, Poznan University of Life Sciences, 60-637 Poznan, Poland
Arkadiusz Sadowski: Faculty of Economics, Department of Economics and Economic Policy in Agribusiness, Poznan University of Life Sciences, 60-637 Poznan, Poland
Krzysztof Piotr Pawłowski: Faculty of Economics, Department of Economics and Economic Policy in Agribusiness, Poznan University of Life Sciences, 60-637 Poznan, Poland

Agriculture, 2024, vol. 14, issue 10, 1-16

Abstract: Farm overinvestment is highly dangerous in how it affects productivity and profitability. Therefore, it imperatively needs to be measured in the context of investment support offered under the Common Agricultural Policy. In turn, technical efficiency is one of the best methods for measuring farm investment. This paper analyzes the technical efficiency of 3273 Polish farms based on unpublished FADN (Farm Accountancy Data Network) data from 2010–2019. The purpose of this study was to indicate the level of, and changes in, technical efficiency of Polish farms in function of their investment levels, with particular emphasis on overinvested holdings. Technical efficiency was examined using stochastic frontier analysis (SFA). The study proved a decline in technical efficiency in underinvested farms and in those affected by absolute overinvestment (i.e., ones where the assets-to-labor ratio grows while labor productivity drops).

Keywords: investment analysis; data science; farms; overinvestment in farms; technical efficiency (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2024
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