Can We Improve Farm Performance? The Determinants of Farm Technical and Environmental Efficiency

The environmental impacts of economic activities have become an important aspect in the evaluation of their overall performance. Consistently, traditional measures of technical efficiency have been extended to assess both the economic and environmental performance of firms. This study aims to use these measures to analyze the performance of a sample of Catalan arable crop farms. Specifically, we apply the methodology recently developed by Coelli et al. (2007) and Murty et al. (2012), and extend it to a consideration of the stochastic conditions under which production takes place as proposed by Chambers and Quiggin (1998 and 2000). Results suggest that efficiency ratings depend on model specification. Also, ignoring the stochastic nature of production yields downward-biased efficiency scores. Empirical findings suggest that environmental and technical efficiency are strongly interrelated indicating that an efficient use of chemical inputs improves both environmental and technical performance of farms.