The main objective of this study is to measure and compare levels and trends in the agricultural efficiency and productivity among the countries in the European Union. To complete the analysis, I use data drawn from the Farm Accountancy Data Network (FADN), and my study covers the period 1995-2009. In the thesis I present the theories behind Data Envelopment Analysis (DEA) and the Malmquist index as a way of measuring respectively efficiency and productivity. DEA evaluates each DMU (Decision Making Unit) by choosing a benchmark, and seeks the best proportional way of improvement. The outcome of a DEA is an efficiency score between 0 and 1, where 1 indicates that the DMU is efficient, and a value between 0 and 1 that a DMU is inefficient. Malmquists total factor productivity index use the non-parametric technique of data envelopment to fit distance functions. This approach is non-stochastic and assumes a constant returns to scale on the frontier technology. Malmquists productivity index is commonly used, because it can decompose the productivity growth into a Catching-up and a Technical change part. In the assignment I use DEA for two purposes. First I apply a DEA to each year separately, in order to clarify how a country performs relative to the other countries of the same year. My analysis shows, that the Netherlands, Denmark and Malta are located on the efficient frontier every year, which means, that according to DEA there is no potential improvement for those countries. Generally the results of the changes in efficiency from year to year, gives an idea of how the Catch-up effect contributes to Malmquists TFP (total factor productivity) growth. Second, I carry out a DEA for the entire dataset at once to compare the efficiency scores across the years. The results show that Denmark, the Netherlands and Malta are the countries with the highest average annual efficiency scores, which means that farms in Denmark, the Netherlands and Malta are those which on average perform best. Furthermore I apply the Malmquist index approach, to measure and decompose productivity growth in the agricultural production for the "old nations" of the European Union1. The reason for restricting the calculations to only comprising the old countries, is to examine whether there is a coincident between the expansions of the European Union2 and the productivity of the old nations. According to the Malmquist analysis, Denmark is the country with the highest average annual productivity growth (2,22 %). Besides that the results of the Malmquist approach show, that the old EU countries over the time period 1995-2009 experienced an overall increase in productivity. The average annual productivity developments for the old countries are very stable in the interval [-3%, 3%] right up to, and including 2006. In 2007, the Malmquist index increases by 7.47%, which is followed by significant productivity declines in 2008 and 2009. Overall, the analysis in this thesis states that the presence of the new countries of the EU from a productivity/relative efficiency point of view, has no impact on that of the old countries. In general, this paper proposes an updated view of agricultural productivity in the EU countries, where each country can compare their regions productivity developments with the productivity developments in other EU countries. The results of both the DEA and Malmquist approaches show that the Netherlands and Denmark are among the best performing countries in terms of efficiency and productivity.
|Educations||MSc in Business Administration and Management Science, (Graduate Programme) Final Thesis|
|Number of pages||106|