Financial efficiency analysis of Hungarian agriculture, fisheries and forestry sector

Fenyves V., Tarnóczi T., Bács Z., Kerezsi D., Bajnai P., Szoboszlai M. (2022): Financial efficiency analysis of Hungarian agriculture, fisheries and forestry sector. Agric. Econ. – Czech., 68: 413–426.

download PDF

In this study, we examine the efficiency of companies in Hungary's agriculture, fisheries and forestry sector. We analysed corporate efficiency by using stochastic frontier analysis (SFA). We used two methods to perform the SFA calculations – the Cobb-Douglas and translog functions. The result variable for the SFA calculation was gross value added (GVA), and the explanatory variables were tangibles, material costs, employee costs and other costs. The original database contained cross-sectional and time series data and was transformed into a panel database. We used the maximum log-likelihood method for parameter estimation. We performed the efficiency analysis in the case of the Cobb-Douglas and translog functions in two ways – first, without z variables (factor effects) and second, considering different factors (subsectors, workforce categories, ranking by total assets and ranking by total sales). Taking z variables into account increased the value of the efficiency coefficients. The latter model's results show that the companies' average performance in the sector examined was more than 70%. Further calculations also showed that the subsectors of the agriculture, fisheries and forestry sector differed in efficiency scores. The larger companies operated more efficiently than the smaller ones in the sector examined.

Abdul I., Wulan Sari D., Haryanto T., Win T. (2022): Analysis of factors affecting the technical inefficiency on Indonesian palm oil plantation. Scientific Reports, 12: 3381.
Abate T.M., Dessie A.B., Adane B.T., Tesfa T., Getu S. (2022): Analysis of resource use efficiency for white cumin production among smallholder farmers empirical evidence from Northwestern Ethiopia: A stochastic frontier approach. Letters in Spatial and Resource Sciences, 15: 213–235.
Aigner D.J., Chu S.F. (1968): On estimating the industry production function. The American Economic Review, 58: 826–839.
Aigner D., Lovell C.A.K., Schmidt P. (1977): Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6: 21–37.
Bakucs L.Z., Latruffe L., Fertő I., Fogarasi J. (2010): The impact of EU accession on farms' technical efficiency in Hungary. Post-Communist Economies, 22: 165–175.
Bakucs Z., Fertő I., Vígh E. (2020): Crop productivity and climatic conditions: Evidence from Hungary. Agriculture, 10: 421–432.
Baráth L., Fertő I. (2015): Heterogeneous technology, scale of land use and technical efficiency: The case of Hungarian crop farms. Land Use Policy, 42: 141–150.
Baráth L., Fertő I., Hockmann H. (2020): Technological differences, theoretical consistency, and technical efficiency: The case of Hungarian crop-producing farms. Sustainability, 12: 1147.
Baráth L., Fertő I., Staniszewski J. (2021): Technological heterogeneity in pig farming: A metafrontier approach – Perspectives from Hungary and Poland. Agriculture (Basel), 11: 961–974.
Battese G.E., Coelli T.J. (1992): Frontier production functions, technical efficiency and panel data: With application to paddy farmers in India. Journal of Productivity Analysis, 3: 153–169.
Battese G.E., Coelli T.J. (1995): A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20: 325–332.
Bojnec Š., Latruffe L. (2013): Farm size, agricultural subsidies and farm performance in Slovenia. Land Use Policy, 32: 207–217.
Caves R.E., Barton D.R. (1991): Efficiency in US Manufacturing Industries. Cambridge, US, MIT Press: 204.
Coelli T.J., Prasada D.S.P., O'Donell C.J., Battese G.E. (2005): An introduction to efficiency and productivity analysis. New York, US, Springer: 341.
Čechura L., Žáková Kroupová Z., Lekešová M. (2022): Productivity and efficiency in Czech agriculture: Does farm size matter? Agricultural Economics – Czech, 68: 1–10.
Diaz M.A., Sánchez R. (2008): Firm size and productivity in Spain: a stochastic frontier analysis. Small Business Economics, 30: 315–323.
Farrell M.J. (1957): The measurement of productive efficiency. Journal of the Royal Statistical Society (A, general), 120: 253–281.
Hall R.E., Jones C.I. (1999): Why do some countries produce so much more output per worker than others? The Quarterly Journal of Economics, 114: 83–116.
Henningsen A., Coelli T. (2020): Package 'frontier'. Stochastic frontier analysis. Available at (accessed Sept 8, 2021)
Horváthová J., Mokrišová M., Suhányiová A. (2014): Analysis of cost of equity models in calculating economic value added of Slovak businesses. In: International Multidisciplinary Scientific Conferences on Social Sciences and Arts SGEM 2014, Albena, Bulgaria, Sept 2–7, 2014: 35–42.
Giannakis E., Bruggeman A. (2015): The highly variable economic performance of European agriculture. Land Use Policy, 45: 26–35.
Gorton M., Davidova S. (2004): Farm productivity and efficiency in the CEE applicant countries: A synthesis of results. Agricultural Economics, 30: 1–16.
Kim M., Maksimovic V. (1990): Debt and input misallocation. The Journal of Finance, 45: 795–816.
Kalirajan K.P., Shand R.T. (1999): Frontier production functions and technical efficiency measures. Journal of Economic Surveys, 13: 149–172.
Keszthelyi S. (2021): The Results of the Test Farm Information System in 2020 (A tesztüzemi információs rendszer eredményei 2020). Budapest, Hungary, Agrárközgazdasági Intézet (Institute of Agricultural Economics): 193. (in Hungarian)
Kovacs K., Szucs I. (2020): Exploring efficiency reserves in Hungarian milk production. Studies in Agricultural Economics, 122: 37–43.
Latruffe L., Fogarasi J., Desjeux Y. (2012): Efficiency, productivity and technology comparison for farms in Central and Western Europe: The case of field crop and dairy farming in Hungary and France. Economic Systems, 36: 264–278.
Lichtenberg F.R., Siegel D. (1990): The effects of leveraged buyouts on productivity and related aspects of firm behavior. Journal of Financial Economics, 27: 165–194.
Meeusen W., van den Broeck J. (1977): Efficiency estimation from Cobb-Douglas production functions with composed error. International Economic Review, 18: 435–444.
Mitsopoulos I., Tsiouni M., Pavloudi A., Gourdouvelis D., Aggelopoulos S. (2021): Improving the technical efficiency and productivity of dairy farms in Greece. Studies in Agricultural Economics, 123: 95–100.
Náglová Z., Šimpachová Pechrová M. (2019): Subsidies and technical efficiency of Czech food processing industry. Agricultural Economics – Czech, 65: 151–159.
Novotná M., Volek T. (2014): Labour as a factor of production in the context of gross value added growth in sector A. Scientia Agriculturae Bohemica, 45: 129–135.
Orea L., Kumbhakar S.C. (2004): Efficiency measurement using latent class stochastic frontier model. Empirical Economics, 29: 169–183.
Palia D., Lichtenberg F. (1999): Managerial ownership and firm performance: A re-examination using productivity measurement. Journal of Corporate Finance, 5: 323–339.
Petrie A.G. (2016): Introduction to Regression and Modeling with R. San Diego, US, Cognella, Inc.: 328.
Pitt M.M., Lee L.F. (1981): The measurement and sources of technical inefficiency in the Indonesian weaving industry. Journal of Development Economics, 9: 43–64.
Richmond J. (1974): Estimating the efficiency of production. International Economic Review, 15: 515–521.
Schmidt P. (1985): Frontier production functions. Econometric Reviews, 4: 289–328.
Sheather S.J. (2009): A Modern Approach to Regression with R. New York, US, Springer Texts in Statistics, Springer Science + Business Media, LLC.: 393.
Simon F., Novák J. (2002): The evaluation of economic situation and comparison of Czech and French agricultural enterprises. Agricultural Economics – Czech, 48: 389–394.
Thomassen M.A., Dolman M.A., van Calker K.J., de Boer I.J.M. (2009): Relating lifecycle assessment indicators to gross value added for Dutch dairy farms. Ecological Economics, 68: 2278–2284.
Van Passel S., Nevens F., Mathijs E., van Huylenbroeck G. (2007): Measuring farm sustainability and explaining differences. Ecological Economics, 62: 149–161.
Zsarnóczai J.S., Zéman Z. (2019): Output value and productivity of agricultural industry in Central-East Europe. Agriculture Economics – Czech, 65: 185–193.
download PDF

© 2022 Czech Academy of Agricultural Sciences | Prohlášení o přístupnosti