Determinants of technical efficiency of Slovenian farms

We investigate the determinants of technical efficiency of Slovenian farms employing the parametric stochastic frontier and non-parametric Data Envelopment Analysis (DEA) methods. The inherited initial inefficiencies of Slovenian family farms are confirmed by their relatively low technical efficiency. During the analysed period 1994-2003 the degree of technical efficiency has increased from around 0.5 to almost 0.8. Farm specialisation associated with technological change is found to be a crucial determinant for increasing technical efficiency. The negative impact of farm commercialisation on technical efficiency is explained by a specific nature of livestock farms, in particular, with intra-farm intermediary consumption. The use of hired labour has no significant influence, but mixed results are found for rented land. The results suggest possible sources of imperfections in farm input markets