Productivity dispersion and persistence in European agriculture

Improving and maintaining agricultural productivity, which is pivotal to deliver private and public goods, is challenged by increasingly uncertain market and environmental conditions. Understanding differences in productivity among farms and its persistence over time helps assess the vulnerability of agricultural production to these external shocks. In this paper, we study productivity dispersion for European agriculture, assess the importance of different productivity components such as technical efficiency and environmental components, and investigate the persistence of productivity and its components over time. We measure total factor productivity based on a stochastic production frontier model applied to accountancy data from more than 100,000 farms and 26 European countries over the period 2004–2018 (N = 740,256). The results reveal a substantial dispersion in total factor productivity, even within the individual countries and farm types. Environmental factors play important roles in explaining these differences. Productivity persistence is high overall, but varies across farm types; for example, it is lowest for granivore farms and higher for mixed farms. We find that productivity persistence is slightly increasing over time, pointing toward improvements in the resilience of European farming systems during the considered period.