Productivity change in Slovenian agriculture during the transition: a comparison of production branches

In this paper we investigate how Total Factor Productivity (TFP) has developed in Slovenian agriculture during the ten years of the transition for the period 1994-2003, and which agricultural production specializations recorded the highest TFP growth. We use an output-oriented TFP model that includes three different outputs (crop, livestock, and other outputs) and four inputs (land, labor, capital, and intermediate consumption). Empirical results indicate that TFP, on average, progressed only slightly, by 1.2 percent, over the ten-year period. However, this relatively slow TFP growth hides a switchback evolution over the analyzed period. The decomposition of the TFP change indicates that its change is mostly due to a technological change, which increased by 3 percent. Technical efficiency has remained rather stable on average, suggesting that farmers were able to implement the new technologies on time. Dissimilar developments in TFP are shown according to the production specialization. Crop farms have performed the best, with a TFP progress on average by 9 percent solely due to technological progress. For all branches, technological change constitutes the sole part of TFP change, except for sheep farms, which recorded a high technical efficiency progress. As we used a common frontier, our result indicates that crop specialization is leading the country's agricultural technology.