Technical Efficiency of Hungarian Farms Before and After Accession

Hungary is one of the ten countries that have joined the European Union (EU) in May 2004. Hungarian farmers are now entitled to receive direct payments per ha, in the frame of the Single Area Payment Scheme (SAPS). While these payments are still lower than the ones received by farmers in the EU-15, they are higher than what Hungarian farmers used to receive from national pre-accession budget. This raises the question of whether accession to the EU has had a positive impact on farmers’ performance. In order to contribute to this issue, the paper will investigate technical efficiency of Hungarian farmers between 2001 and 2005 using a panel dataset of farms. While some studies have investigated other aspects of farm performance in Hungary (Total Factor Productivity in 1997 by Hughes, 2000; profitability and Total Factor Productivity in 2000 by Davidova et al., 2002), there is a clear gap regarding technical efficiency of Hungary’s farming sector (the only post-reform paper is by Mathijs and Vranken, 2001). This paper will therefore contribute to this research, using data covering a crucial period for Hungary, the end of the transition and the first accession year. The paper is organised as follows: section 2 outlines the methodology. Data and results obtained with are reported and discussed in section 3, and finally, section 4 concludes.