Assessing productivity change with SFA (Stochastic Frontier Approach) in the sheep sector of Greece

The objective of this paper is to measure total factor productivity (TFP) growth in a panel of sheep farms in Greece and assess the relative contribution of technical change, technical efficiency change and scale efficiency change in observed productivity growth. Such decomposition can be useful in planning well defined policies which can support the sector's sustainable development via the optimization of input/output use. A stochastic frontier production function approach is adopted and maximum likelihood is used to estimate the parameters. The data used for the econometric estimation are obtained from the Greek Farm Accounting Data Network for the period 1997–2002. TFP has been growing in the sector but at a diminishing rate. The major determinant of productivity growth is technical change, which has been shifting the frontier by 2.4% on average during this period, but is counteracted to some extent by technical and scale inefficiency each reducing TFP growth by about 0.3% p.a.