Efficiency-focused Economic Modeling of Competitiveness in the Agri-Food Sector

Abstract Producers operating on a competitive market seek possibilities for maximization of expected profit by increasing production, especially by non-decreasing returns to scale. Nevertheless, the low growth rate of demand for agri-food products must determine the change of efficiency-based relations in the sector. Therefore, the Authors believe that the main source of producers’ competitiveness and growth is not the increase of input factors but the efficiency of their use. The competitiveness is based on productivity. The efficiency-focused modeling presented in the paper bases on the production function, more precisely on the SFA method (the Stochastic Frontier Approach), which is appropriate primarily for samples with high randomness. The efficiency assessment is carried out on the basis of data collected from farms across Poland with the predominant plant production within the framework of FADN (Farm Accountancy Data Network). In the analysis Cobb-Douglas and translogarithmic models are applied. The presented concept can be treated as an empirical illustration of the application of modern econometrics methods for economic modeling of competitive development.