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Economic size of farms and adjustments of the total factor productivity to the business cycle in Polish agriculture

Author

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  • Bazyli CZYZEWSKI
  • Adam MAJCHRZAK

    (Poznan University of Economics and Business, Poznan, Poland)

Abstract

The article presents an approach to changes in the total factor productivity (TFP) which differs from that generally found in the literature. Changes are calculated in the real terms using the detailed input-output matrices for representative farms in Poland, for different economic size classes, in the years 2007-2013. Input-output matrices were used for the decomposition of the Hicks-Moorsteen TFP index. The goal is to evaluate changes in the real TFP in the downturn and recovery phases of the business cycle in agriculture. It was found that the reaction of TFP to business cycle changes on "small", "medium" and even "large" family farms in Poland is diametrically opposite to that observed in the case of large-scale farms. More than 90% of farms in Poland (except for the largest) increase technical productivity in the conditions of the economic downturn and lower it in the conditions of the economic recovery. Such behaviour is pro-cyclic and irrational, alluding to the 17th-century King's effect, which is vanishing in the agricultural systems of highly developed countries. The hypothesis is proposed that the size of the price expectation error which causes that effect is negatively correlated with the economic size of the farm, but at the same time it is proportional to the percentage of agricultural income obtained from subsidies and other payments under the SAPS system.

Suggested Citation

  • Bazyli CZYZEWSKI & Adam MAJCHRZAK, 2017. "Economic size of farms and adjustments of the total factor productivity to the business cycle in Polish agriculture," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(2), pages 93-102.
    • Handle: RePEc:caa:jnlage:v:63:y:2017:i:2:id:240-2015-agricecon
    DOI: 10.17221/240/2015-AGRICECON
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    References listed on IDEAS

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    1. Zhuo Chen & Wallace E. Huffman & Scott Rozelle, 2011. "Inverse Relationship Between Productivity And Farm Size: The Case Of China," Contemporary Economic Policy, Western Economic Association International, vol. 29(4), pages 580-592, October.
    2. Andrius Kazukauskas & Carol Newman & Daragh Clancy & Johannes Sauer, 2013. "Disinvestment, Farm Size, and Gradual Farm Exit: The Impact of Subsidy Decoupling in a European Context," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(5), pages 1068-1087.
    3. Luther Tweeten & Carl Zulauf, 2008. "Farm price and income policy: lessons from history," Agribusiness, John Wiley & Sons, Ltd., vol. 24(2), pages 145-160.
    4. Štefan Bojnec & Imre Fertő, 2013. "Farm income sources, farm size and farm technical efficiency in Slovenia," Post-Communist Economies, Taylor & Francis Journals, vol. 25(3), pages 343-356, September.
    5. Cunha, Arlindo & Swinbank, Alan, 2011. "An Inside View of the CAP Reform Process: Explaining the MacSharry, Agenda 2000, and Fischler Reforms," OUP Catalogue, Oxford University Press, number 9780199591572.
    6. Timothy J. Coelli & D.S. Prasada Rao & Christopher J. O’Donnell & George E. Battese, 2005. "An Introduction to Efficiency and Productivity Analysis," Springer Books, Springer, edition 0, number 978-0-387-25895-9, December.
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    Cited by:

    1. Aleksander Grzelak & Piotr Kułyk, 2020. "Is Michał Kalecki's theory of investment applicable today? The case study of agricultural holdings in the EU countries," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(7), pages 317-324.

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