Investigation into Technical Efficiency of the Agriculture Sector in the Balkan Region

Myslym OSMANI
Agricultural University of Tirana, Albania

 

Abstract
This study aims to investigate the efficiency of the use of basic production factors (land, labor, capital) in the agricultural sector for the Balkan region. The objective is to evaluate the technical efficiency of their use and to identify regional differences and possibilities to increase agricultural production. The study uses FAO data for 8 Balkan countries (excluding Serbia, Kosovo, and Montenegro because of their data absence). For the evaluation of technical efficiency, we use the average rank method calculated as a mean of productivities of the basic factors of production, as well as econometric modeling (panel data models with fixed effects and random effects, as well as the Stochastic Frontier Approach). The study uncovers that the technical efficiency of land, labor, and capital in the region is relatively low (60%) with huge opportunities for improvement (40%) which translates into great opportunities to increase production. Albania is positioned around the average level (62%) with significant opportunities for efficiency improvement. Improving technical efficiency is of particular importance for increasing the competitiveness of Albanian farms. Effectiveness of the use of agricultural inputs (chemical fertilizers, pesticides, water, etc.), access of farmers to short-term credit, good use of agricultural land, advanced agricultural technologies and innovation, and effective policies to reducing the labor force in agriculture through sector restructuring are determinants of the efficiency of the Albanian agricultural sector.

Keywords: Balkan, gross fixed capital formation, technical efficiency, rank, econometric model, SFA model, arable land, agricultural value added

JEL Code: B23, C01, C02, Q12

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