Bernhard Brümmer

Decomposition of Productivity Growth Using Distance Functions: The Case of Dairy Farms in Three European Countries

Within an output distance function framework, the Total Factor Productivity growth index is decomposed into four components (technical change, technical and allocative efficiency, and scale component). We estimate stochastic translog output distance functions using panel data from dairy farms over the period 1991–94 for three European countries (Germany, the Netherlands, and Poland). Results indicate that the change in the productivity growth index in Germany (+6%) and Poland (−5%) are mainly dictated by the technical change component. In contrast, the productivity growth index in the Netherlands (+3%) is influenced by allocative efficiency components. Copyright 2002, Oxford University Press.

Die europäische Agrarpolitik vor dem Hintergrund der Osterweiterung

Abstract Reimar von Alvensleben asks in his article whether the “Agrarwende” in Germany could be a model for Europe. He argues that the new agricultural policy (the so-called “Agrarwende”), which has been proclaimed and implemented after the German BSE crisis 2000/2001, adds new problems to the already existing problems of the Common Agricultural Policy (CAP). The strategy of improving international competitiveness of German agriculture by promoting the niche markets for organic food, animal-friendly produced food and regional food is unrealistic and thus neglecting the problem of improving the competitiveness of 85−90% of German agriculture. The criterion of ecological efficiency (How to achieve ecological goals at lowest costs?) is totally neglected in agricultural environmental policy. The strategy of implementing environmental and animal welfare standards by the market mechanism will not lead to reasonable results because of perception distortions of the consumers. As a consequence of distorted perception of food risks by politicians, cost of risk prevention are too high and/or safety and health standards in other less spectaculous areas are too low. For these reasons he concludes that the “Agrarwende” in Germany cannot be regarded as a model for Europe, especially not for Eastern Europe. Bernhard Brümmer and Ulrich Koester write in their paper that the Eastern Enlargement of the EU will have significant implications for governance of the CAP. The evolution of the CAP has led to a permanent increase in the intensity of regulation, although the rate of external protection has declined. Past experience - mainly revealed by the European Court of Auditors - has evidenced many irregularities and even fraud as a by-product of the CAP. Governance problems are due to badly designed policies, which demand control of even individual farms and give the member countries, administrative regions (which are supposed to implement the policies on the local scale) and the individual farms themselves incentives to breach the rules. In their view governance problems will certainly increase in the enlarged EU. The new member countries have a weaker administrative capacity and are subject to more corruption than the present EU countries. Adequate policy reaction should lead to fundamental changes of the CAP. Klaus Frohberg argues that in its Mid Term Review the EU-commission proposes a change in the most important instruments of the CAP. Direct payments and intervention prices belong to this group. In his paper the impact of these changes is discussed. Direct payments shall become decoupled from production and be summarised into a single payment to farmers. In addition, the right of these transfers shall be made tradable independent of a simultaneous exchange of land. With regard to the intervention prices they shall be reduced as to approach world market levels. Assuming that the Member States will confirm the proposals the CAP is expected to improve considerably. Allocation and transfer efficiency will increase, consumer welfare will go slightly up, taxpayers will be little if at all affected and the EU can defend its position in the negotiations of the ongoing WTO round. These advantages accrue to the current as well as to the new Member States. In spite of the improvements the CAP still needs to be enhanced in some areas such as the market organisation of sugar and milk.