WIT Press

Financial Efficiency Versus Social Efficiency: A Comparison Using Selected Agrarian Profiles In Andalusia


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WIT Press


C. R. García


In terms of sustainability, the agrarian policy of the European Union (CAP) is now facing a dilemma. In today’s scenario of decreasing subsidies, some traditional agrarian enterprises may be not only financially inefficient but, even worse, totally unprofitable. These farms nowadays manage an employment level (family hand labour and external sources – immigration included) that helps to maintain people in the territory. The initial purpose of this paper is to classify selected agrarian profiles in a double entrance matrix by comparing the relative financial and employment efficiencies. Using Data Envelopment Analysis (DEA), considering variable returns to scale input oriented BCC-DEA, all possible efficient frontiers are obtained. The methodology consists of removing sequentially the corresponding efficient agrarian profiles in the previous frontier, until there are not enough observations to perform the analysis. Both matrix axes represent these efficient frontiers – efficient sets of agrarian profiles – from the most efficient to the absolutely inefficient. The position in the matrix of an agrarian profile defines the relationship between relative financial and employment efficiencies. Depending on its financial result (net margin) the analysed agrarian profile may or may not need subsidies to survive, that is maintaining its productive structure. In this situation, these aids may be conditioned both to financial and employment efficiencies in order to support good practices in terms of resource consumption and employment level. For example, a non profitable (with a negative or little net margin) but financially and socially (hand labour consumption) efficient agrarian profile may be subsidised to maintain a stable global environment. On the other hand, other situations should be restructured to improve their resource consumption (including hand labour) and/or their productive structure.