Impacts of climate on technical efficiency in the Hungarian arable sector

The aim of this study is to estimate the influence of climate factors on the technical efficiency of Hungarian arable farms. The technical efficiency of farms is affected by several factors such as the technology used, the relative factor abundance, the institutional reforms with the input and output market environment, the farm size and scale economies, the organisation and management, and the farm’s specialisation. We employed a two-step approach to identify the impact of climate change on the efficiency of these farms. In the first step, using the Data Envelopment Analysis model, we calculated the efficiency (dependent variable in the second stage of analysis) of these processes. In the second step, we investigated the effect of climate and soil factors (independent variables) on efficiency by applying the Simar and Wilson (2007) approach. In this way we can assess the impacts of matched environmental variables through a robust, representative dataset for Hungary. Our results show that temperature and precipitation increases had statistically significant, positive effects on the technical efficiency of farms in the seeding and vegetative periods in both the constant and variable returns to scale models, and temperature increase during the generative phase of crop production had a negative effect on production efficiency.