Productivity growth on Finnish grain farms from 1976 2006: a parametric approach

Authors

• Sami Myyrä MTT Agrifood Research Finland, Economic Research, Luutnantintie 13, FI-00410 Helsinki, Finland
• Pekka Pihamaa Ministry of Agriculture and Forestry, Finland
• Timo Sipiläinen MTT Agrifood Research Finland, Economic Research, Luutnantintie 13, FI-00410 Helsinki, Finland

DOI: https://doi.org/10.23986/afsci.5959

Keywords:

technical change, scale effect, production function, time trend, general index

Abstract

In the long term, productivity and especially productivity growth are necessary conditions for the survival of farms and the food industry in Finland. The natural handicap and small farm size are challenges, but farmers are further challenged by the decoupling of supports and their transformation into direct income payments. Additionally, farmers actions are limited by some institutional settings that substantially reduce incentives to improve productivity. Technical progress was found to drive the increase in productivity on grain farms in Finland. The scale had only a moderate effect and for the whole study period (19762006) the effect was close to zero. Total factor productivity (TFP) increased, depending on the model, by 0.61.7% per year. The results demonstrated that the increase in productivity was hindered by the policy changes introduced in 1995. The cumulative increase in TFP over the study period was at the same level as the measured yearly changes in TFP. The results highlight the nature of grain farming in Finland as well as the challenges in simultaneously taking into account the general trend and yearly variation in TFP.;