How to Increase Productivity in Kosovo Agriculture: A Story of Size and Technical Efficiency

Abstract

Kosovo is struggling with low productivity in agriculture and an overwhelming majority of small farms. This paper analyses changes in the factor mix that can bring the highest increase in marginal productivity, employing a non-parametric quantile regression based on Farm Accountancy Data Network (FADN) data. Two different quantile regressions are estimated, for the median 0.5th quantile, describing the nature of the input-output relationship for a ‘typical’ farm and for the 0.8th conditional quantile, characterising a reasonably ‘efficient’ farm. The results show that optimal marginal productivity can be achieved by
‘typical’ farms by increase in farm size but it requires drastic changes in factors which are currently hardly feasible in Kosovo (e.g. 3-4 FTEs family labour, 0.5 to 1.8 hired). For an efficient farm, the optimal marginal productivity is achieved at lower values of inputs. This suggests that productivity enhancements can be obtained by a careful balance of both efficiency and scale augmentation measures.