Returns to scale in Lithuanian family farms : a qualitative approach

Tomas Balezentis, Alvydas Balezentis, Irena Kriksciukaitiene

Research output: Contribution to journalArticle

Abstract

The optimal farm size and structure constitute an important issue for transitional economies. Indeed, modeling of the optimal farm size rests on an estimation of the returns to scale. This study estimated the optimal farm size in terms of different size measures. More specifically, the data envelopment analysis was employed to analyse the farm-level data and thus determine the prevailing returns to scale. This study utilised the qualitative approach (Färe et al., 1983; Färe, Grosskopf, 1985; Grosskopf, 1986). Furthermore, the economic indicators describing farm performance across different ranges of returns to scale were analysed. The Farm Accountancy Data Network data for 2004-2009 was used for the analysis. Results of the qualitative assessment of returns to scale across farming types did indicate that most of the analysed farms operated at a sub-optimal scale. The further analysis implied that farm size should be increased by the different means within different farming types. For instance, crop farms should reduce their labour input and UAA in order to ensure the scale efficiency. The economic size, however, needs to be expanded. Crop farms were operating at the optimal scale in terms of assets. Mixed farms should expand in terms of all of the size variables. Finally, livestock farms should increase their economic size and assets. Our study suggested that specialized crop farms should be ca. 280 ha in size, whereas mixed farms should cover 200 ha on average, and specialized livestock farms should reach 125 ha.
Original languageEnglish
Pages (from-to)180-189
JournalEconomics and management = Ekonomika ir vadyba
Issue number3
Publication statusPublished - 2013

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Keywords

  • Most productive scale size
  • Efficiency
  • Data envelopment analysis

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