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Decomposing Dynamics in the Farm Profitability: An Application of Index Decomposition Analysis to Lithuanian FADN Sample

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  • Tomas Baležentis

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Aistė Galnaitytė

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Irena Kriščiukaitienė

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Virginia Namiotko

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Lina Novickytė

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Dalia Streimikiene

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

  • Rasa Melnikiene

    (Division of Farm and Enterprise Economics, Lithuanian Institute of Agrarian Economics, LT-03105 Vilnius, Lithuania)

Abstract

The changes in farm structure have been observed in Lithuania as well as in other Central and Eastern European countries. These changes, to a high extent, have been driven by decreasing profitability of the small farms. In this paper, we look into the changes in the profitability of Lithuanian family farms across different farm size groups. Farm size is measured in terms of the standard output. The period covered is 2005–2016. The index decomposition analysis model and Shapley value are adapted for the analysis. The proposed framework ensures complete decomposition among other desirable properties. The decomposition of the changes in profitability was carried out following the DuPont identity. The results suggest that for small (respectively large) farms the asset turnover (respectively profit margin) component appear more important, whereas the leverage effect remained minimal irrespectively of the farm size group.

Suggested Citation

  • Tomas Baležentis & Aistė Galnaitytė & Irena Kriščiukaitienė & Virginia Namiotko & Lina Novickytė & Dalia Streimikiene & Rasa Melnikiene, 2019. "Decomposing Dynamics in the Farm Profitability: An Application of Index Decomposition Analysis to Lithuanian FADN Sample," Sustainability, MDPI, vol. 11(10), pages 1-15, May.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:10:p:2861-:d:232661
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    2. Dariusz Kusz & Iwona Bąk & Beata Szczecińska & Ludwik Wicki & Bożena Kusz, 2022. "Determinants of Return-on-Equity (ROE) of Biogas Plants Operating in Poland," Energies, MDPI, vol. 16(1), pages 1-22, December.
    3. Germ`a Coenders & N'uria Arimany Serrat, 2023. "Accounting statement analysis at industry level. A gentle introduction to the compositional approach," Papers 2305.16842, arXiv.org, revised Jun 2025.
    4. Zuzana Hloušková & Michaela Lekešová & Anna Prajerová & Tomáš Doucha, 2022. "Assessing the Economic Viability of Agricultural Holdings with the Inclusion of Opportunity Costs," Sustainability, MDPI, vol. 14(22), pages 1-15, November.
    5. Agnė Žičkienė & Rasa Melnikienė & Mangirdas Morkūnas & Artiom Volkov, 2022. "CAP Direct Payments and Economic Resilience of Agriculture: Impact Assessment," Sustainability, MDPI, vol. 14(17), pages 1-24, August.
    6. Rodica Chetroiu & Ana Elena Cișmileanu & Elena Cofas & Ionut Laurentiu Petre & Steliana Rodino & Vili Dragomir & Ancuța Marin & Petruța Antoneta Turek-Rahoveanu, 2022. "Assessment of the Relations for Determining the Profitability of Dairy Farms, A Premise of Their Economic Sustainability," Sustainability, MDPI, vol. 14(12), pages 1-17, June.
    7. Junghwan Lee & Jinsoo Kim, 2021. "A Decomposition Analysis of the Korean Manufacturing Sector: Monetary vs. Physical Outputs," Sustainability, MDPI, vol. 13(11), pages 1-13, May.
    8. Margherita Masi & Yari Vecchio & Gregorio Pauselli & Jorgelina Di Pasquale & Felice Adinolfi, 2021. "A Typological Classification for Assessing Farm Sustainability in the Italian Bovine Dairy Sector," Sustainability, MDPI, vol. 13(13), pages 1-14, June.
    9. Dirk Beyer & Jana Hinke, 2020. "European benchmarking of determinants of profitability for companies with accrual accounting in the agricultural sector," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(11), pages 477-488.

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