Assessing the efficiency of diversified farms in Slovakia using DEA metafrontier approach

Abstract

The agricultural sector in Slovakia is characterized by low productivity and diversification. There is a substantial prospect of increasing agricultural productivity using the existing level of inputs and limited resources more efficiently. This study employed the metafrontier approach, which is a variation of the Data Envelopment Analysis technique to assess the technical efficiency of diversified farms that operate under different technological frontiers. A panel sample of 215 Slovak farms performing other gainful activities from 2014 to 2019 was constructed based on the Farm Accountancy Data Network database. Diversified farms were divided into three groups according to the type of specialization on farms specializing in crop, animal and mixed production. Results show that there are significant differences between farms using different technologies, specializing in crop, animal, and mixed production. The average technical efficiency of diversified farms that focus on crop production (0.72) and mixed production (0.71) generally has a high and stable level when compared to farms with animal production (0.65). In addition, this empirical analysis shows that specialization in livestock production is the least suitable from the point of view of technical efficiency in the case of farms that perform other income-generating activities. Finally, average technological gap ratio values indicate that diversified farms in crop production can compete efficiently with other farms and, on average, produce 89% of their potential outputs with their inputs. The existence of a technological gap between farms concerns the technology of resource utilization, therefore it would be necessary to rationally change resource utilization and support the improvement of management and organizational systems by improving the level of management.