Technical efficiency and economic performance of dairy production in the EU: the role of size

Abstract

This paper deals with the economic performance and technical efficiency of dairy production in the European Union and its persistent and transient parts. Attention is focused on the differences in these efficiency indicators according to the economic size. The analysis covers two types of farming: specialized milk and mixed crops and livestock using FADN data in the period from 2004 to 2017. The analysis is based on the four-component model that represents the most advanced approach to technical efficiency analysis at present and the one-step estimation procedure. To the best of knowledge, this is the first application of the four-component model based on the one-step estimation procedure on these types of farming in the EU. The results show the highly efficient production in both types of farming. In both types of farming, the transient technical efficiency is higher than the persistent one. The overall and transient technical efficiency do not differ statistically among groups according to economic size. The lowest persistent technical efficiency was found in the group of highest economic size. This group has the highest share of current subsidies in gross farm income, produces the least gross farm income in total output, achieves also the lowest cost-effectiveness and the lowest value of performance indicators compared to the others.