Economic performance and crop farm efficiency in mountainous and other less favoured areas in Greece

M. Galea, E. Oxouzi, E. Papanagiotou, K. Melfou

Abstract: The upcoming changes in the EU concerning the socio - economic criteria that were used since mid-70’s to determine less favored areas and the introduction of «intermediate» regions, which will now be based on physical handicaps, are going to affect the level of support given to these areas throughout Europe. This in turn may have repercussions on profitability and efficiency of farming in less favored areas, a subject of great importance for many rural areas in Greece. This study estimates the degree of technical efficiency of crop farms in mountainous and other less favored areas of the prefecture of Thessalonica in Greece, first in a competitive environment without subsidies, and, following the granting of compensatory allowances. In addition, it carries out a comparative analysis of farm economic performance to investigate the relative contribution of subsidies to farm incomes and profitability. To accomplish the research objectives, primary data were collected with personal interviews from a sample of 78 farms. Data Envelopment Analysis was used for the estimation of pure technical, overall technical and scale efficiency. Research results show that the average overall efficiency of crop farms is around 49 %, while average technical efficiency is estimated at 65% and average scale efficiency is 76.9%. The farms in other less favored areas, despite higher production costs, achieve better economic performance than those in mountainous areas, due to the production of higher value crops. Compensatory allowances have a critical role for farm profitability in both mountainous and other less favored areas. However, a way forward for LFAs, in view of diminishing financial support, is the production of better quality and goods that are more competitive.

Keywords: compensatory allowances; crop farms; Data Envelopment Analysis; economic performance; Greece; less favored areas; scale efficiency; technical efficiency

Date published: 2019-08-22