Influence of rural development policy targets on farm efficiency: An efficiency study of labour intensive grape growing family farms

The aim of this study was to provide an empirical analysis of the performance of Macedonian grape-growing family farms assessed in terms of technical, allocative, and economic efficiency and to relate aspects targeted in the Rural Development Program (RDP) to the efficiency scores. The study was based on a two-step efficiency analysis, applying Data Envelopment Analysis (DEA), in the first step, and Tobit regression analysis in the second step. Data were collected between 2006 and 2008 through face-to-face interviews with 300 grape growers in the Tikvesh vineyard district in Macedonia, each represented by the three-year average of inputs, outputs and prices. The results indicated a large potential for efficiency improvement. The average efficiency was 0.71 for technical efficiency, 0.79 for allocative efficiency and 0.56 for economic efficiency. More efficient farms used smaller areas, irrigated a smaller proportion of total area, used less hired labour, used and paid less for inputs, but produced a larger quantity, with higher value per hectare. RDP measures targeted at stable yield, yield quality, and modernisation of equipment were important for enhancing and improving farm efficiency and consequently, the competitiveness of the entire sector.