Environmental and technical efficiency of French suckler sheep farms under pollution-generating technologies: A multi-equation stochastic frontier approach using infometrics

Reducing the negative environmental impact of production activities without (substantial) loss of production is a crucial challenge for the agricultural sector. Investigating farms' environmental and technical efficiency (TE) levels and drivers can contribute to addressing this issue. In this regard, based on recent theoretical developments on the appropriate handling of undesirable outputs in the modeling of production technologies, this paper introduces a multi-equation stochastic frontier framework for technical and environmental efficiency (EE) analysis. This framework is applied to a sample of French suckler sheep farms. The results indicate that, on average, farms in the sample can increase their desirable output by 20% without using more inputs while reducing their greenhouse gas emissions by 24%. Findings also show that relatively high (low) levels of TE are associated with relatively low (high) levels of EE and that the likelihood for a farm to be both technically and environmentally efficient is relatively low. Only 32% of the farms in the sample have a high level of TE and EE. Drivers such as decoupled direct payments are positively associated with EE and negatively associated with TE, while no significant effect is found for green direct payments.