Are Farms in Less Favoured Areas Less Efficient?

This paper investigates farm technical efficiency (TE), taking into account technological heterogeneity among farms in the case of the Slovenian Farm Accountancy Data Network sample of farms in the 2007-2010 period. A random parameter model is used to analyse inter- and intra-sectoral heterogeneity of farms. The empirical results confirmed that it is important to handle both inter- and intra-sectoral heterogeneity. Additionally the estimations based on propensity score matching (PSM) demonstrated that farms in less favoured areas (LFAs) are slightly technically less efficient than farms in non-LFAs. However, combined PSM and difference in difference estimator cast serious doubts that LFA farms are less efficient in terms of TE. Both groups of farms are able to adopt technologies to natural and other conditions for their operation