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A framework for assessing the governance efficiency of agricultural farms

Bachev, Hrabrin (2022): A framework for assessing the governance efficiency of agricultural farms.

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There have been continuous debates about the essence and levels of efficiency of farms and agrarian organizations, with an increasing focus on governance aspects in recent years. Nevertheless, most of the existing assessments are at a conceptual or qualitative level due to well-known “measurement” problems related to transacting costs. This article incorporates the New Institutional and Transaction Costs Economics framework and suggests a practical approach for assessing the level and factors of governance efficiency of Bulgarian farms as a whole and of different types and locations. The evaluation of governance efficiency of the country’s farms is made on the basis of original micro-data collected by the managers of typical farms. The "Nature of the problems in effective organization for major class farm transactions for securing needed factors of production and marketing of output" is used as an indicator for the comparative efficiency and adaptability (equal, lower, or greater to another farm/s or organisation/s depending on the extent of transacting difficulties) of individual farms. The study has found that the governance efficiency of farms is at a Good level but 60% of all farms in the county are with a Low efficiency and will likely cease to exist in near future. Major factors for inferior governance efficiency of Bulgarian farms are unsatisfactory efficiency in Supply of Necessary Labour, Innovations and Know-how, and Funding. There is a huge variation in the level and factors of governance efficiency of farms with different juridical types, sizes, product specializations, and geographical and ecological locations as well as in the share of farms with different levels of efficiency in each group. Furthermore, a strong correlation has been found between the level of governance efficiency and adaptability of farms, and diverse critical internal and external market, technological, institutional, personal, etc. factors that could feasibly increase the competitiveness of holdings. The study has proved that there is a big discrepancy between the new assessments of Governance efficiency with dominating traditional approaches for farm efficiency assessments based on factors' productivity. The study has also found that there was an improvement in the overall governance efficiency of Bulgarian farms compared to 2016. Nevertheless, the share of (good and high) efficient farms significantly declined during the same period. The suggested approach has to be further improved, and widely and periodically applied in economic analysis at various levels which require the systemic collection of a novel type of micro-data on farms governance and transaction costs.

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