Does Managerial Behavior Determine Farm Technical Efficiency? A Case of Grape Production in an Economy in Transition

Abstract

This study explores how farmers' managerial behavior in their production planning processes influences the economic performance of their farms, measured through input-oriented and output-oriented technical efficiency. A conceptual framework in which differences in managerial behavior were assumed to be due to bounded rationality was developed. The 3-year means (2006–2008) from a panel data set on grape-producing family farms in FYR Macedonia were analyzed. Technical efficiency was estimated with the nonparametric data envelopment analysis approach. The impact of farmers' managerial behavior was assessed in a second-stage regression. The results suggest that bounded rationality in farmers' production planning decisions causes inefficiency. Copyright © 2011 John Wiley & Sons, Ltd.

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