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The Spanish beef sector in the 1990s: impact of the BSE crisis on efficiency and profitability

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  • Belen Iraizoz
  • Isabel Bardaji
  • Manuel Rapun

Abstract

The beef sector has undergone a series of changes as a result of successive food scares and agricultural policy reforms. The purpose of the paper is to analyse technical efficiency and profitability in Spanish livestock enterprises during the 1990s, focusing on the possible impact of the BSE crisis and the 1992 CAP reform on each of these variables. The main findings reveal the existence of technical inefficiency during the sample period. Some factors have a positive impact, others a negative impact, on efficiency. As far as the effects of CAP reform and the BSE crisis are concerned, the results show the ineffectiveness of agricultural policy regulation to promote efficiency in the sector and the improvement in the efficiency as a consequence of the BSE crisis. The profitability analysis reveals the importance of direct subsidies, however. In their absence, a large percentage of holdings is unable to remunerate either own or rented factors. Analysis shows, therefore, that there are two counteracting effects from subsidies. On the one hand, they form a major part of the resources of livestock farmers, allowing them to meet input costs and preventing land abandonment. On the other hand, they have a significant negative impact on the level of technical efficiency estimated.

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  • Belen Iraizoz & Isabel Bardaji & Manuel Rapun, 2005. "The Spanish beef sector in the 1990s: impact of the BSE crisis on efficiency and profitability," Applied Economics, Taylor & Francis Journals, vol. 37(4), pages 473-484.
    • Handle: RePEc:taf:applec:v:37:y:2005:i:4:p:473-484
    DOI: 10.1080/0003684042000295359
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    References listed on IDEAS

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    1. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
    2. G. S. Maddala, 1994. "Econometric Methods And Applications," Books, Edward Elgar Publishing, volume 0, number 293.
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    Cited by:

    1. Islam Hassouneh & Teresa Serra & José M. Gil, 2010. "Price transmission in the Spanish bovine sector: the BSE effect," Agricultural Economics, International Association of Agricultural Economists, vol. 41(1), pages 33-42, January.
    2. Basurto Hernandez, Saul & Maddison, David & Banerjee, Anindya, 2018. "The effect of PROCAMPO on farms’ technical efficiency: A Stochastic Frontier Analysis," 2018 Annual Meeting, August 5-7, Washington, D.C. 274376, Agricultural and Applied Economics Association.
    3. Trnkova, Gabriela & Mala, Zdenka & Vasilenko, Alexandr, 2012. "Analysis of the Effects of Subsidies on the Economic Behavior of Agricultural Businesses Focusing on Animal Production," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(4 Special), pages 1-12, December.
    4. Minviel, Jean Joseph & Latruffe, Laure, 2014. "Meta-regression analysis of the impact of agricultural subsidies on farm technical efficiency," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182767, European Association of Agricultural Economists.
    5. Marie-Noelle Duquenne & Maria Tsiapa & Valantis Tsiakos, 2019. "Contribution of the Common Agricultural Policy to agricultural productivity of EU regions during 2004–2012 period," Review of Agricultural, Food and Environmental Studies, INRA Department of Economics, vol. 100(1-4), pages 47-68.
    6. Tovar Reanos, Miguel & Martinez-Cillero, Maria, 2021. "Technical efficiency and equity effects of environmental payments in Ireland," Papers WP711, Economic and Social Research Institute (ESRI).
    7. Areal, Francisco J. & Tiffin, Richard & Balcombe, Kelvin G., 2012. "Provision of environmental output within a multi-output distance function approach," Ecological Economics, Elsevier, vol. 78(C), pages 47-54.
    8. Temoso, Omphile & Villano, Renato & Hadley, David, 2016. "Evaluating the productivity gap between commercial and traditional beef production systems in Botswana," Agricultural Systems, Elsevier, vol. 149(C), pages 30-39.
    9. Maria Martinez Cillero & Fiona Thorne & Michael Wallace & James Breen & Thia Hennessy, 2018. "The Effects of Direct Payments on Technical Efficiency of Irish Beef Farms: A Stochastic Frontier Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 669-687, September.
    10. Boris Bravo-Ureta & Daniel Solís & Víctor Moreira López & José Maripani & Abdourahmane Thiam & Teodoro Rivas, 2007. "Technical efficiency in farming: a meta-regression analysis," Journal of Productivity Analysis, Springer, vol. 27(1), pages 57-72, February.
    11. Maria Martinez Cillero & Miguel Tovar Reaños, 2023. "Farm technical and environmental efficiency and subsidy redistribution in Ireland: A simulation approach of possible performance and equity effects," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(2), pages 394-412, June.
    12. Areal, Francisco Jose & Balcombe, Kelvin & Tiffin, Richard, 2012. "Integrated spatial dependence into Stochastic Frontier Analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(4), pages 1-21, December.
    13. Zhu, Xueqin & Demeter, Robert Milan & Oude Lansink, Alfons G.J.M., 2008. "Competitiveness of dairy farms in three countries: the role of CAP subsidies," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44143, European Association of Agricultural Economists.
    14. Maria Martinez Cillero & Michael Wallace & Fiona Thorne & James Breen, 2021. "Analyzing the Impact of Subsidies on Beef Production Efficiency in Selected European Union Countries. A Stochastic Metafrontier Approach," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1903-1923, October.
    15. Zhu, Xueqin & Milán Demeter, Róbert, 2012. "Technical efficiency and productivity differentials of dairy farms in three EU countries: the role of CAP subsidies," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 13(1), pages 1-27.
    16. Frýd, Lukáš & Sokol, Ondřej, 2021. "Relationships between technical efficiency and subsidies for Czech farms: A two-stage robust approach," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    17. Nwigwe, Cecilia & Okoruwa, Victor & Obi-Egbedi, Oghenerueme, 2015. "Efficiency differentials and technological gaps in beef cattle production systems in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 229377, International Association of Agricultural Economists.
    18. Hyun Joung Jin & Jang-Chul Kim, 2008. "The effects of the BSE outbreak on the security values of US agribusiness and food processing firms," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 357-372.
    19. Michelle Phillips, 2013. "Inefficiency in Japanese water utility firms: a stochastic frontier approach," Journal of Regulatory Economics, Springer, vol. 44(2), pages 197-214, October.
    20. Zbranek, Peter & Fandel, Peter, 2015. "Development of productivity and its components in Slovak agriculture before and after EU accession: Analysis of the impact of CAP introduction on the performance indicators of Slovak crop and livestoc," 2015 Fourth Congress, June 11-12, 2015, Ancona, Italy 207353, Italian Association of Agricultural and Applied Economics (AIEAA).
    21. Jerzy Marzec & Andrzej Pisulewski, 2017. "The Effect of CAP Subsidies on the Technical Efficiency of Polish Dairy Farms," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 9(3), pages 243-273, September.

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