Impact of Recent Economic Crisis on Agricultural Production Efficiency of the European Countries

1. Impact of Recent Economic Crisis on Agricultural Production Efficiency of the European Countries MonirulHasan TóthJózsef Corvinus University of Budapest May 3, 2013

2. Objectives • To examine the impact of recent economic crisis on the production efficiency (technical efficiency) on EU agricultural output. • To examine whether any regional disparity remains in the technical efficiency

3. Literature review • To capture the effect of agricultural policy reform on technical efficiency, some authors used year specific dummy variables to capture policy changes. These works done by Morrison Paul et al. (2000), Carroll et al. (2009), Lambarra et al. (2009) and Brümmer et al. (2006). • Several authors such as Weersink et al. (1990), Hallam and Machado (1996), Sharma et al. (1999), O‟Neill and Matthews (2001), Rezitis et al. (2003), Helfand and Levine (2004), Latruffe et al. (2008b), Zhu et al. (2008b), Tonsor and Featherstone (2009), and Bakucs et al. (2010) included location dummies like state, regional or country level in their regression of farm technical efficiency scores to see the regional disparity.

4. Literature review • It is widely found that the impact on technical efficiency is almost consistently negative across literature.Giannakas et al. (2001), Rezitis et al. (2003), Hadley (2006), Latruffe et al. (2009), Bakucs et al. (2010), Zhu et al. (2008a) found the same trend in their studies. • Leff (1964); Leys (1965); Huntington (1968); Beck and Mahler (1986); Lien (1986); Vial and Hanoteau (2010) establish that corruption increases efficiency.

5. Data • World Bank data: 2003-2009 for EU-23 member states • For measuring technical efficiency- • Inputs: -Agricultural land (square kilometre) - Labor (number of agricultural workers) - Fertilizer (kilogram/hector) • Output: - Aggregate output of agriculture (value added, constant 2000 US$) • other variables: - Government Effectiveness - Control of Corruption - Year dummies - Regional dummies

6. Government Effectiveness & Control of corruption • Government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies. [WB] • Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests. [WB]

7. Methodology • Data Envelopment Analysis (DEA) for measuring the technical efficiency • Panel data regression analysis- to examine the relationship among variables and years. Random effect model is used.

8. Data Envelopment Analysis (DEA) Input orientation and CRS Source: Farrell 1957.

9. Random effect regression • Technical Efficiency (TEit) = f {govt. effectiveness, control of corruption, specific year dummy (t 2003 to t2009), specific region dummy of EU}

10. Descriptive stat.

11. Econometric results: RE panel regression model

12. Thank you