Performance of Swiss dairy farms under provision of public goods

Farmers provide not only agricultural products but also public goods and services. When analyzing farm performance, these different outputs should be modelled separately. In this study, we investigated Swiss dairy farms located in the plain, hill and mountainous regions for the period between 2003 and 2009. For the representation of production technology, we employed a parametric output distance function and modeled particular public goods and services as a separate output. The resulted elasticities of agricultural output coincided with the corresponding shares of this output. However, the elasticities of particular public goods and services were higher than the corresponding shares. This might be related to the fact that this output contains different kinds of direct payments, "production" of which does not require additional inputs or trade-off with other outputs. Our results showed that the level of pro ductivity in the plain region did not depend on the scale of production, but more on the improvement in the technical efficiency. However, in the hill and mountainous regions, there was potential for scale adjustments. Sample farms in these regions showed significant decreasing returns to scale, which suggests that the average farm in these subsamples could improve its productivity by scaling down its production. Our results might also be confirmation of decelerated structural change, since decreasing returns to scale might reflect an obstacle to growth. We found the wide range of the efficiency scores for Swiss farms, which indicates potentials for improvements. Among others, off-farm income as well as high level of ecological services showed significantly positive influence on the technical efficiency of Swiss farms in all three regions.