Returns to scale in the Lithuanian family farms: A quantitative approach

Abstract

The paper analysed the returns to scale and scale elasticity prevailing in the Lithuanian family farms. The analysis was based on the farm-level data. Specifically, the three farming types were considered, viz. crop, livestock, and mixed farming. The non-parametric method, data envelopment analysis, was employed to define the production frontier and compute the estimates of the scale elasticity. The inefficient observations were projected on the production frontier and analysed both in input and output orientations. Meanwhile, the efficient observations were treated in accordance with Banker and Thrall (1992). The results enabled to estimate the most productive scale size for each of the considered farming types. The farm size was expressed both in absolute and relative terms. These estimates, indeed, might provide a momentum for discussions in regard to the farm structure and sustainable agricultural policy in Lithuania.