Comparison Of Agricultural Production Factors In The European Union And Mercosur Countries: Issues In Cobb-Douglas Production Function Estimation

After 25 years of negotiations, representatives of the European Union and the Mercosur countries reached an agreement on concluding an Economic Partnership Agreement. The prospective agreement has long raised concerns and prompted extensive debate, particularly within the agricultural sector of EU Member States. This study compares selected characteristics of agricultural production in the EU and Mercosur using a set of analytical approaches, including the Cobb-Douglas production function framework. The analysis draws on FAOSTAT data on gross agricultural production value, agricultural employment (number of persons employed in agriculture), and net capital stock in agriculture, forestry and fishing for EU Member States and Mercosur countries. The study employs empirical, comparative and statistical analyses, complemented by descriptive, correlational and quantitative techniques as well as data presentation and visualisation methods. The results indicate that total factor productivity (TFP) is higher in the EU than in Mercosur, implying greater output for comparable inputs of capital and labour and a higher pace of technological change in the EU. In contrast, Mercosur countries exhibit lower returns to scale than the EU.