Technical Efficiency and Productivity of Farms: A Periurban Case Study Analysis

Gaviglio et al.
Agricultural and Food Economics (2021) 9:11

https://doi.org/10.1186/s40100-021-00181-9
Agricultural and Food
Economics
RESEARCH Open Access
Technical efficiency and productivity of

farms: a periurban case study analysis
Anna Gaviglio1, Rosalia Filippini1* , Fabio Albino Madau2, Maria Elena Marescotti1 and Eugenio Demartini1
* Correspondence: rosalia.filippini@
unimi.it Abstract
1
Department of Health, Animal
Science and Food Safety, University Periurban farming systems are characterized by the need to adapt the farming practices
of Milan, Via Celoria, 2, 20133 coping with a modified natural and social environment. Questions are thus posed on the
Milano, Italy efficient use of the inputs. The purpose of this study is to estimate the technical efficiency
Full list of author information is
available at the end of the article and the productivity of periurban farms. To do so, the study employs a data envelopment
analysis that properly captures the heterogeneity of the periurban farming system. The
sample considered livestock and crop farms, located in the South Milan Agricultural Park,
where 50 farms were selected and interviewed. Results show that crop farms are more
efficient than livestock farms, but they have a less productive technology. The participation
in short food supply chains and the multifunctional agriculture does not affect the levels of
technical efficiency of the farms. Policies are thus needed to improve the education level of
farmers and to sustain the efficiency of farms that diversify the farm’s economy.
Keywords: Data envelopment analysis, Periurban farming system, Italy
Introduction
The periurban farming system (PFS) is defined as the farming system which is performed
close to the urban area (FAO, 2010). The periurbanization is a process for which the rural
area mixes with the urban area with consequences at territorial level (EEA, 2006). In Italy,
this phenomenon is very relevant. Italy has a percentage of artificial surface higher than
the community’s average 7.8% versus 4.6%, and almost all the national territory is charac-
terized by a diffuse urbanization (ISPRA, 2015). Moreover, according to ISPRA (2015), al-
most 60% of the Italian urbanization process between 2008 and 2013 has taken place in
agricultural areas, especially on arable land (48%). The impact on the sustainability of the
agricultural activity is thus relevant, especially because of the competition for the use of
natural resources, such as land and water, which are critical inputs in the agriculture’s
production process. Considering the land for example, the urban pressure may lead to in-
crease the land’s prices both to buy and to rent, sometimes at the limit of land specula-
tion (Quon, 1999). According to authors, in metropolitan areas, the constant loss of value
of the agricultural land assets compared to the urban ones describes the most powerful
push toward urbanization (Livanis et al., 2006; Sali et al., 2009; Pirani et al., 2016). As a
reaction, farms in metropolitan areas may be pressured by high rents to adapt their farm-
ing practices. In this situation, farms have multiple options: they can improve their
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Gaviglio et al. Agricultural and Food Economics (2021) 9:11 Page 2 of 18
technical efficiency or technology, they can move towards production of higher value-
added and higher yield commodities (Ženka et al., 2016; Sokolow, 2003), they can inten-
sify or make extensive the cropping systems (Zasada, 2011; Filippini et al., 2016a). In all
these cases, in PFS, the response of each farm may be different and unique because of the
specific urban pressure that farms are facing (Soulard et al., 2017). Moreover, at the socio-
economic level, farms may experience competition in labor market, which is another
farming critical input. This may depend on the fact that urban jobs pay more than agricul-
ture activity, and this reinforces the lack of turnover in the agricultural sector (European
Parliament, 2018). Thus, how periurban farms have access and efficiently use the inputs
may be compromised in PFS, with repercussion on the economic sustainability.
In this framework, to properly protect the PFS land and the farming economy sup-
porting its innovations, several policies and actions are carried out. The agri-urban pro-
jects are those initiatives led by urban and periurban actors which combine agriculture
and the city (Marraccini et al., 2013). In metropolitan areas, the development of agricul-
tural parks, or agri-parks, is particularly encouraged as a way to protect agricultural
land and maintain the agriculture around the metropolis (Paül and Mackanzie et al.,
2013; Perrin et al., 2018). The development of agri-park relies on the multifunctional
character of the land use where recreational and other social functions are combined
with the farming activity and economy, which is used as a cost-efficient way of protect-
ing and maintaining open spaces in the urban fringe (Jarrige et al., 2013). All these ac-
tions have the objective to exploit the local agriculture by supporting the link between
urban dwellers and proximal farmers. To foster the PFS economic sustainability, usually
farmers are invited to diversify their economic activity, through the multifunctional
agriculture (Zasada, 2011) and the short food supply chains (SFSC) (Filippini et al.,
2016b). Recreational services, social farming, and agritourisms are the most common
multifunctional agriculture activities in periurban areas (Zasada, 2011), while the par-
ticipation in farmers’ markets located in the proximal urban areas, in solidarity pur-
chasing groups, or the online and on-farm direct sale is the most common SFSC.
According to literature, these economic activities allow periurban farmers to gain more
profit, to diversify the risk among different food chains—conventional and alternative—
and different economic sectors such as the agro-food one, tourism, and social services.
For this reason, they are considered as an index of the adaptation of periurban farmers
to the new urban demands and pressure and thus a way to maintain an economic vi-
able agriculture in the periurban fringe (Aubry and Kebir, 2013; Paül e McKenzie 2013;
Mastronardi et al., 2019).
Nevertheless, the effective impact of all those experiences on the economic sustainabil-
ity of PFS has been questioned (Demartini et al 2017; Venn 2006; Filippini et al., 2016b).
SFSCs are not always driven by food producers, and their goals are not necessarily
farmers’ profit maximization (Venn, 2006). The profit is uncertain and unstable over the
time (Filippini et al., 2016b), thus hampering the farming long-term sustainability.
Farmers engaging in SFSC and multifunctional agriculture have not always the relevant
expertise, with repercussions on the efficient management of the activity (Filippini et al.,
2016b). In metropolitan areas, scholars have argued that agri-urban projects may create
also constraints in the use of the inputs, since they increase labor time and the potential
for burnout, while revenues do not always consistently increase (Jarosz, 2008). Finally, in
Italy, analysis has found no link between the multifunctional agriculture and the economic
sustainability of periurban farms (Gaviglio et al., 2017). Especially, in the case of multi-
functionality, the efficient use of the inputs by farmers was questioned (Gaviglio et al.,
2017).
The efficient use of inputs in PFS is thus an open question because periurban farmers
need to adapt the use of their inputs, such as land, due to the urban pressure and due
to the pressure to diversify their economy. Being the efficient use of inputs one of the
conditions for economic sustainability (De Koeijer et al., 2002; Gonçalves et al., 2009),
the overall purpose of this study is to analyze the technical efficiency of periurban
farms. In particular, the paper aims first to detect the technical efficiency of the farms
in PFS and then to verify if the participation in SFSC and in multifunctional agriculture
may impact the level of technical efficiency. The farms are localized in Italy, in the
South Milan Agricultural Park (PASM), which is the first European Agri-park and
which has the specific scope to capitalize the rural-urban link with agri-urban projects.
To properly take into account the territorial heterogeneity of the PFS, the study em-
ploys a data envelopment analysis (DEA) to compute the technical efficiency scores of
farms.
The article is organized as follows: the analytical framework that links together the
economic sustainability and the farms technical efficiency is introduced in the “Eco-
nomic sustainability, technical efficiency, and productivity of farms” section; the empir-
ical model for the estimation of technical efficiency and productivity is presented in
“Material and methods” section, along with the case study and the dataset and the ap-
plied model; the empirical findings are presented and discussed in the “Results” section;
and, finally, concluding remarks are summarized in the “Conclusion” section.
Economic sustainability, technical efficiency, and productivity of farms

The farm’s economic sustainability is defined by the current capacity of the farm to exist
in the long term (Gaviglio et al, 2014). In other words, the farm is managed in a way that
ensures its long-term sustainability. At territorial level, if the farm stops its activity, the
land may be sold to other farms or to actors belonging to other economic sectors. Thus,
the farm can be replaced either by other farms, or by other economic activities. In the
former case, at sectoral level, the maintenance of the agricultural economy is not threaten,
since the agriculture continues and probably in a more efficient way. In the second case,
the replacement of the farming sector by another one may affect the overall importance
of the agriculture in the area and at sectoral level. In periurban areas, the probability of re-
placing the farming activity by another economic sector is higher than in other rural areas.
Thus, the analysis of how single farms are managed is crucial in analyzing the potential
economic sustainability of PFS at territorial level (Gaviglio et al., 2014). Only recently,
studies emphasize the need to study new solutions for improving the input efficiency in
constrained territories such as urban and periurban areas (Opitz et al., 2015). According
to literature, the economic sustainability analysis is not sufficient per se to understand the
specific farm management decision making which is at the base of the sustainability’s
choices of the farmer (De Koeijer et al., 2002). Scholars have proposed to use the tech-
nical efficiency methodologies to provide evidence on the management capacity of
farms, and thus insights on the capacity of the farms to be economically sustain-
able (De Koeijer et al., 2002; Gonçalves et al., 2009). Technical efficiency (TE)
refers to the ability of the farms to attain the highest level of output given a set of inputs.
The estimation of the farms’ TE allows understanding if the farmer’s decision making
allow him to “doing things right” (Maietta, 2007). In other words, TE estimates allow un-
derstanding if farms are properly using the inputs at disposition, as well as the possible in-
come gains resulting for an improvement of the inputs’ use. It thus provides a measure of
how the decision making of the farms support its sustainability (De Koeijer et al., 2002;
Gonçalves Gomes and Soares de Mello, 2009).
In the TE analysis, it is assumed that it is possible to define an optimal level of inputs’
transformation, and the analysis computes the actual ability of the farmer to transform
the resources into output by the farm. The distance between the optimal level of effi-
ciency and the actual farm’s TE measures the technical inefficiency, which is inter-
preted as the failure of farms in producing the maximum output that is possible
considering the inputs provided. Thus, the technical efficiency (TEi) is calculated based
on the ratio between the output obtained by the farm yi and the optimal standard yi .
In this perspective, the productivity is usually defined as the relationship between the
quantity of the product obtained (output) and the volume of one or more factors (inputs)
required for its production. Thus, the productivity is the measure of the capacity of the
farm to convert the inputs into the final output given a certain level of knowledge and
technology. While TE provides a measure of the capacity of transforming the inputs, by
measuring the degree of adherence to the observed production process to a standard of
optimality—the so-called “Efficient production frontier”—the productivity measures the
technological ground through which such transformation is possible (Lansink et al., 2002;
Arru et al., 2019). Lansink et al. (2002) theorized that when comparing two different farm-
ing systems, the difference between their TE scores could be related to the different tech-
nologies the two farming systems have. In their contribution, they compare not only
different farming practices—organic and conventional farming systems—but also different
productions—livestock and cropping systems. These results had important implications at
political level to better advice farm decision making.
The proposal of Lansink et al. (2002) seems appropriate for studies that want to com-
pare different farming systems located in the same area. Especially it is suitable in the
case of PFS. PFS in fact are characterized by farms that differently respond to the urban
pressure and demand both considering the cropping system and the farming practices
and considering the economic diversification (Soulard et al., 2017; Zasada, 2011; Filip-
pini et al., 2018). At the same time, the differentiation and comparison of different
farming systems is important when farms are working under the same political um-
brella, such as agri-parks, sharing the same territorial policies and pressures. In this
context, according to literature, the policies and analysis should adopt a territorial ap-
proach, where the heterogeneity of the farming systems is taken into account (Torreg-
giani et al., 2012), as in the case of PFS.
TE models are widely used in farming system analysis to study the technical perfor-
mances of farms (Roco et al., 2017; Theodoris et al., 2014). Usually, the models first deter-
mine the TE of farms and then the factors explaining such efficiency. The TE usually
compares the level of gross output with the level of inputs, which in case of farms solely
are the land, the labor, the different variable costs, and the capital. Usually, age and educa-
tion are discussed as potential factors of efficiency (Karimov, 2014). Farmers that are more
educated are considered more prone to be efficient farms (Latruffe et al., 2004; Theodoris
et al., 2014). Younger farmers can be more prone to adopt input-saving innovative tech-
nologies, or on the contrary, older farmers are more efficient, since they can rely on a lon-
ger practical experience in addressing the efficiency stakes (Hadley, 2006). To our
knowledge, few studies have been applied in periurban areas and are considering the PFS
heterogeneity of the different farming systems operating. Most analysis are focused only
on specific farming systems, such as livestock (Van Rensburg and Mulugeta, 2016; Theo-
doridis et al., 2014; Furesi et al., 2013; Madau et al., 2017), fruit (Madau et al., 2015), and
cereals (Madau et al., 2007). On the contrary, few studies have compared different farming
systems and their different market orientation between local and global food chains (Lohr,
and Park, 2010). Especially, few of them have employed a productivity measure to discuss
the farms’ TE levels in terms of their technology (Lansink et al., 2002; Mayen et al., 2010).
The inclusion of the technology ground of the farming systems in the analysis allow to
verify if the differences in the farms’ performances are due to a less productive technology,
to a lower TE in production, or both. This aspect is important in addressing policies in
specific areas.
Up to now, the literature on TE models applied in PFS is focused in developing coun-
tries (Binam et al., 2004; Asogwa et al., 2012). These studies are not comparable with
European and Italian case studies. On the contrary, this study wants to provide insights
on the TE and the productivity of farms located in a productive agricultural area, but
under urban pressure and under the political umbrella of an agricultural park, which
asks farms to follow rules in the production and economy’s diversification (Perrin et al.,
2018). In this sense, only recent studies have tested the impact of the economic diversi-
fication on the levels of TE (Lohr and Park; 2010; Bauman et al., 2019; Arru et al.,
2019). The interest on the impact of economic diversification’s activities on the level of
TE is justified by the increasing interest that institutional bodies and scholars are
assigning to such activities that are seen as drivers of economic sustainability for
farmers, but no research on the TE of farms participating (Lohr and Park; 2010; Bau-
man et al., 2019).
Materials and methods

Case study
The case study is the area of the South Milan Agricultural Park (PASM) (Fig. 1). The
PASM is a regional metropolitan agricultural park embracing the southern, eastern,
and western areas of the city of Milan (northern Italy), one of the most highly product-
ive agricultural regions in Europe. The park was created in 1990 to protect and sustain
the natural ecosystems and to safeguard, qualify, and promote agricultural land and ac-
tivities. It was conceived to provide green areas available to urban dwellers and to pro-
tect farmers’ economy, avoiding the loss of agricultural land due to urban pressure. In
fact, despite the highly productive agriculture, the proximity to the metropolis of Milan
is a strong push to convert land from agriculture to urban purposes. The PASM in-
cludes 61 municipalities and covers an area of about 47,000 ha, of which approximately
37,000 ha of agricultural surface and 19,000 ha of urbanized territory. The park in-
cludes only plain area. The area involves approximately 576 farms, characterized by in-
tensive farming practices. The main crops are maize, rice, permanent meadows,
Fig. 1 Case study. The points identify the farms
soybean, winter barley, Italian ryegrass, and winter wheat. The main livestock are cattle,
poultry, and pigs. In the area, farms can sell their products to big retailers, to big pro-
cessors, or directly to consumers through SFSCs (Gaviglio et al., 2014). Since its estab-
lishment, the PASM actions over the agriculture performed in the area have been
especially focused on valorizing the natural aspects of the area, as well as to valorize
the activities performed by farmers that can strengthen the link with the closer Milan
urban residents: SFSCs, the agritourisms, and recreational activities. Such activities are
ruled by several documents: the Norme Tecniche di Attuazione (NTA, Technical
Norms) and the Piano di Settore Agricolo (PSA, Agricultural Plan). They contain a
large number of rules and regulations aimed to (i) protect the agricultural activities, (ii)
promote new job opportunities in the agricultural sector, especially young people, (iii)
introduce more sustainable farming practices and lower impact agronomic techniques
such as organic farming, and (iv) enhance the landscape, the environment, the cultural
and historical heritage, and protect the water resources1. A specific interest is in the
creation of new job opportunities in the agricultural sector, especially young people,
and in enhancing the landscape, the environment, and the cultural and historical heri-
tage (Città Metropolitana di Milano, 2007).
In this area, the project “Osservatorio economico-ambientale per l’innovazione del
Parco Agricolo Sud Milano” (Economic Observatory for Innovation of the South Milan
Agricultural Park)2 had the purpose to verify the economic, environmental, and social
sustainability of the farms to develop a support, the 4Agro, for the Park management.
Resulting from a stratification process (Gaviglio et al., 2014), 50 farms were sampled to
represent the four areas’ characteristic of the PASM. In 2015–2016 semi-structured in-
terviews were conducted to the farms (Fig. 1). For a detailed description of the sample
stratification process, please see Gaviglio et al., 2014.
For the purpose of this study, six farms were excluded from the analysis since their
revenues were lower than 50,000 euro per year. In this way, it was possible to select
1
Information on http://www.provincia.mi.it/parcosud/index.jsp
2
For a detailed description of the project, please visit http://www.cittametropolitana.mi.it/parco_agricolo_
sud_milano/agricoltura/sitpas/sitpas_osservatorio.html
professional farms and to homogenize the economic value of the sample. Table 1 sum-
marizes the characteristics of the 44 farms where the DEA was finally applied. As it is
possible to see, in the sample, most of the farms have multifunctional agriculture and
participate in SFSC, making the case study relevant for the purpose of this study.
Empirical model
Technical efficiency (TE) can be estimated through parametric and not parametric
methods. The stochastic frontier analysis is a parametric method, which assumes that
the deviation from the efficient frontier depends on the farm’s inefficiency, thus the
farmer decision-making, and a stochastic parameter that is not controlled by farmers
(Bauer, 1990). The problem with this method is that it assumes a parametric specifica-
tion for the production technology, which in the end can affect the efficiency results
(Lansink et al., 2002). The data envelopment analysis (DEA) is a non-parametric ap-
proach for estimating TE (TE) (Charnes et al. 1978). Solving a linear programming
problem, DEA calculates the efficiency by comparing each production unit against all
other units. Since it does not assume a productive technology, the method is suitable
for samples for which the technological ground is not known, as well as for small sam-
ple size, because a frontier is built without considering the statistical variability of the
observed data in determining the efficiency. The DEA estimates the TE of each pro-
ductive decision-making units (DMUs) taking into account the resources used by the
units and the results they obtain. DEA models optimize the efficiency index of each in-
dividual DMU in order to estimate an efficient piecewise linear frontier. The DMUs
with higher TE scores become the benchmarks for the inefficient ones. The remaining
DMUs will have an efficiency score between 0 and 1 inversely proportional to their dis-
tance from the frontier. In the study, we employed an output-oriented approach to cal-
culate both constant return to scale (TECRS) and variable return to scale (TEVRS)
technical efficiency. The methodology follows several steps.
Table 1 Characteristics of the analyzed sample. Multifunctional agriculture and SFSC are explained
in Table 2
Farms’ characteristics N. %
Farming System
Crops 25 57%
Livestock 19 43%
Usable agricultural area (UAA)
< 50 ha 18 41%
50–100 ha 17 39%
> 100 ha 9 20%
Multifunctional agriculture
Yes 39 89%
No 5 11%
Food chain
Farms in short food supply chains (SFSC) 33 75%
Farms in conventional food chains (CFC) 42 95%
(i) Firstly, TECRS and TEVRS scores were estimated using the software NLogit 5
(Greene, 2011) for each farm. The difference between the two TE measures is that
TEVRS represents the TE without the scale efficiency effect, and thus, it measures
the efficiencies as due to only managerial performance. For this reason, it is also
called the pure TE.
The TECRS for a single output is derived by solving the following linear programming
model (1):
maxθ;λ θi s:t: ð1Þ
X
n
λ j y j − θ i yi − s ¼ 0
j¼1
X
n
λ j xkj þ ek ¼ xk i
j¼1
λ j ≥ 0; s ≥ 0; ek ≥ 0
where θi is the proportional increase in output possible for the i-th farm, λj is an N × 1
vector of weights relative to the efficiency observation, s is the output slack, and ek is
the k-th input slack. Banker et al. suggested that the TECRS model should be adapted to
account for a VRS situation. Thus, by adding the convexity constraint N1’ λ = 1, the
model can be modified into the TEVRS DEA.
A farm has efficient results when the values of θi and λi are equal to 1 and λj = 0. In
contrast, an observation is inefficient when θi > 1, λi = 0, and λj≠0. Solving (1), it is pos-
sible to obtain a measure of TE that reflects the distance between the farm’s observed
and optimal output production for a certain input bundle:
Yi 1
TEi ¼ ¼ ¼ 0 ≤ TE ≤ 1 ð2Þ
Y i θi
where Yi is the maximum possible (optimal) output and Y i is the observed outputs.
Then, a measure of scale efficiency (SE) is obtained by comparing the TECRS and
TEVRS scores, applying (3)
TECRS
SE ¼ ð3Þ
TEVRS
Any difference between the two TE scores indicates that there is scale inefficiency
that limits the achievement of an optimal (constant) scale (CRS).
(ii) The sample was divided in two groups: livestock farms and crop farms. To verify
whether these farms were in a separated frontier function, due to a difference in
the technological ground, following Lansink et al. (2002), the TE was then
separately estimated for the two sub-groups (livestock and crop farms). Two pro-
duction frontiers were estimated, one for crop farms only and the other for live-
stock farms only. In this end, for each farming system, two TE resulted: an
estimation of the TE of crop (and livestock) farms calculated considering the two
groups as in one unique frontier, the overall group TE (TEo), and an estimation of
the TE of crop (and livestock) farms calculated considering the two farming
systems as belonging to two different frontiers (TEg). According to Lansink et al.

(2002), the TEo is related to the TEg by a productivity factor φ which indicates the
difference between the two farming systems’ frontiers.
TEo ¼ φTEg
The productivity index for the two farming systems is thus calculated following (4).
TEo
φ¼ ð4Þ
TEg
where φ is the productivity factor, TEo represents the TE crop (or livestock) farms of
the overall group, thus considering the two groups of farms as in one unique produc-
tion frontier, TEg represents the TE of sub-groups, thus calculating separately the pro-
duction frontiers for the two farming systems, in this study livestock and crops farms.
The hypothesis to test is if the difference between the TE scores is due to inefficient
use of the inputs or to a different technology used by the two groups of farms. A t-test
statistic was then applied to verify if the TE scores of the two farming systems were sig-
nificantly different. If a statistically significant difference was found, the two sub-groups
belong to two different production frontiers. In other words, it would mean that the
there is no technological homogeneity between the two farming systems (Arru et al.,
2019; Lansink et al., 2002).
(iii)Following Lansink et al., (2002) a single-input TE was estimated to verify the role
of single inputs in describing the frontier, using DEAP 2.1 created by Coelli (1996).
With this measure, it was possible to estimate the TE related to each input and the
specific margin saved by each input to achieve full efficiency, assuming the rest of
the inputs and the final output do not change.
(iv) To determine whether a farm operates under increasing return to scale (IRS) or
decreasing return to scale (DRS), a non-increasing return to scale (TENIRS)
condition on the DEA model is imposed (Coelli et al. 1998), so if TECRS = TEVRS,
the farm is operating under CRS; if TENIRS = TEVRS, the farm is operating under
DRS; if TECRS ≠ TEVRS, the farm is operating under IRS.
(v) Finally, as done in other scientific contributions (Latruffe et al., 2004; Bauman
et al., 2019), a discriminatory analysis was then applied to test the impact of
demographic and socio-economic factors on the levels of TE. Specifically, we tested
whether the level of TE is statistically significant different among farmers using
variables that refer to the demographic characteristics of farms and the economic
diversification strategy.
The data
Data are based on semi-structured interviews performed in 2015–2016 to farmers.
Table 2 describes the variables used for the DEA, as well as their main statistics, con-
sidering the sample and divided according the two farming systems, livestock and
crops. The output variable is the total revenues of the farms from the sale of the prod-
uct in both SFSC and CFC and including the CAP payments. The input variables are
land in terms of hectares, variable costs, and the labor both familiar and not familiar.
Table 2 Description of the data envelopment analysis’ input variables and variables of the t-test;
average values (av) and standard deviation (st.dev)
Variables Unit Description Total Total Livestock Crop
sample sample farms av farms av
av max– (st.dev) (st.dev)
(st.dev) min
Output
€’000 Total revenues of the farm, including 519.33 2977.97– 731.96 357.72
Revenues revenues from the sale of the product, the (603.33) 77.00 (825.95) (278.49)
revenues from multifunctional agriculture,
CAP payment.
Input
Land ha Usable agricultural area 78 (76) 404–5 90 (91) 70 (62)
EXPE €’000 Variable costs of the farm: purchase of 187.76 2059.71– 346.50 108.65
seeds, seedlings, fertilizers, plant protection (356.39) 13.07 (540.77) (77.61)
products, veterinary expenses (materials +
work performance), fodder, feed, irrigating
water, electricity, fuels (methane, LPG,
other), insurances, accounting technical
consultancy, banking services, membership
fees for trade associations, rental of
machinery, means of transport and other
goods, agricultural work performed by
third parties, charges for the management
of the farm, fuels
Work €’000 Cost for familiar and non-familiar 121.738 535.50– 137.62 109.67
manpower (966.3) 28.80 (83.44) (105.63)
Discriminatory analysis
VALT % Percentage of total revenues from SFSCs: 14.16 98.56– 14.18 14.16
direct on-farm sale, food processing and (19.09) 0.00 (22.74) (16.29)
sale, sale in farmers markets, groceries,
schools’ canteens, solidarity purchasing
groups.
VCONV % Percentage of total revenues from CFNs 64.5 (27.6) 94.77– 72.12 58.14
0.00 (22.30) (25.21)
MULT % Percentage of total revenues from 29.50 98.56– 8.58 20.47
multifunctional agriculture: didactic farms, (32.94) 0.00 (22.10) (28.23)
agritourism, sub-contractor, on-farm
processing
AGE % Percentage of employers younger than 40 25.34 60.68– 32.61 19.82
years old (20.52) 0.00 (20.82) (18.86)
EDUC % Percentage of employers with high school 73.63 100.00– 71.03 76.61
or university diploma (27.27) 0.00 (23.29) (30.27)
For the t-test, two categories of variables were considered: three economic variables
and two demographic variables. The economic variables refer to the percentage of sale
in SFSC (VALT), the percentage of sale in CFC (VCONV), and the percentage of reve-
nues that derives from multifunctional activity (MULT). Finally, the demographic vari-
ables refer to percentage of workers employed that are less than 40 years old (AGE)
and the percentage of workers that have a diploma and a degree (EDUC).
Results
Results show in the sample farms are efficiently working. Table 3 shows the results of
the efficiency analysis considering the whole sample.
Technical efficiency (TE) analysis suggests that there is room for improving efficiency
in the use of inputs. Especially the TE estimated through CRS reveals that farms have
the possibility to further improve their efficiency on average by 30%. The TE score
is higher when it is calculated under VRS assumption, implying that the farms
could improve their efficiency by 23%. The scale efficiency (SE) is high, suggesting
that adjusting the scale of the operation can improve the farm’s efficiency on aver-
age by 10% (Table 3). The results on the standard deviation show a volatility of
the sample in the TE scores.
Table 4 shows the results for both livestock and crops for the different performance
measures. In the table, the overall efficiency (TEo) average scores compare livestock
and crop farms considering them as part of the same production frontier, thus assum-
ing that they have the same technological ground. The subgroup efficiency (TEg) com-
pares livestock and crop farms considering them as part of two different frontier
functions. The productivity index (φ) indicates the different technological ground of
the two frontiers. Finally, the scale efficiency is calculated for the two farming systems
in case the TE is estimated in the same frontiers (SE overall) or separately for crops
and livestock farms (SE subgroup).
Results on the TEo show that livestock farms are more efficient than crops in the use
of their inputs: livestock farms can improve their efficiency by 22%, while crop farms
by 24%. In this case, scale efficiency (SE overall) is higher for livestock producers than
crop farms (Table 4), suggesting that production could increase by about 8% if livestock
farms could adjust their scale efficiency, a lower value compared to 11% of potential
output increase for crop producers. None of these performance measures is significant
implying that there is no significant difference between the two farming systems in
reaching the optimal TE frontier. However, these measures are related to a unique
frontier for both livestock and crop farms.
On the contrary, the productivity indexes (φ) for the two farming systems are statisti-
cally significant (Table 4). This result implies that the two farming systems lie on a dif-
ferent technological ground, and thus, they must be treated as having two different
production frontiers. In the detail, livestock has a productivity index higher than crop
farms, implying that livestock has a more productive technology than crop farms.
Moreover, the results of the subgroup efficiency TEg scores show that when treated
separately, crop farms are more efficient than livestock farms (0.87 versus 0.79), and
they also have a higher SE (0.95 versus 0.79). These results suggest that crop farms are
less productive than livestock farms because they use a less productive technology,
since their productive index is lower. Nevertheless, considering the technology they
have at disposition, crop farms are more efficient than livestock farms. On the contrary,
livestock farms have a more productive technology, but considering their technology,
they have lower TE scores.
Despite these differences, the fact that no significant difference is found between live-
stock and crops in the overall efficiency scores suggests that livestock farms could sig-
nificantly improve the use of their inputs, and crop farms are able to compensate a less
Table 3 Efficiency analysis results from DEA

Average s.d. Max Min
CRS
TE 0.69 0.20 1.00 0.27
TEVRS 0.77 0.23 1.00 0.29
SE 0.91 0.10 1.00 0.59
Table 4 Estimation of TE by data envelopment analysis (DEA)

TE for the farming systems p
value
Crops (n. 25) Livestock (n. 19)
Variable return to scale technical efficiency TEVRS
Overall efficiency TEo 0.76 0.78 n.s
Subgroup efficiency TEg 0.87 0.79 n.s
Productivity index φ 0.84 0.99 ***
Scale efficiency
SE overall 0.89 0.92 n.s.
SE subgroup 0.95 0.79 n.s
Note: n.s. denotes not statistically significance; *** denotes significance at 1%.
productive technology with a more efficient use of the input. In other words, consider-
ing the frontier, crop farms are so efficient that they compensate their less productive
technology.
Table 5 shows the role of single inputs—land, work, and variable costs—in describing
the frontier, considering a unique frontier for the two farming systems, and considering
two separate frontiers for the farming systems, and thus considering the subgroup effi-
ciency. These results suggest which factors most affect the TE. Moreover, taking into
account the observed and the optimal values, Table 5 shows the savings that could be
possible in terms of input use, if inputs were used efficiently.
VRS
Table 5 Optimal (fully efficient) input use estimated by DEA (average values of TE )
Observed values Optimal values TE Savings
Considering one frontier
Overall efficiency (TEo)
Land (ha) 78.59 64.80 0.80 − 13.79
Expe (€’000) 211.36 183.20 0.79 − 28.16
Work (€’000) 121.74 92.51 0.79 − 29.22
Livestock
Land (ha) 90.44 73.86 0.80 − 16.59
Expe (€’000) 346.50 308.42 0.81 − 38.08
Work (€’000) 137.62 113.03 0.81 − 24.58
Crops
Land (ha) 69.57 57.92 0.80 − 11.66
Expe (€’000) 108.65 88.04 0.78 − 20.62
Work (€’000) 109.67 76.92 0.78 − 32.75
Considering two frontiers
Livestock subgroup efficiency TEg
Land (ha) 90.44 71.95 0.79 − 18.49
Expe (€’000) 346.50 312.58 0.83 − 33.93
Work (€’000) 137.62 115.57 0.83 − 22.05
Crop subgroup efficiency TEg
Land (ha) 69.57 63.61 0.88 − 5.97
Expe (€’000) 108.65 95.43 0.86 − 13.23
Work (€’000) 109.67 99.93 0.89 − 9.74
In Table 5, higher values of TE indicate higher efficiency of the farms in the use of
the inputs. The differences between the three estimates are not significant for both live-
stock and crops farms, both considering livestock and crops part of the same produc-
tion frontier and not. This result implies that farmers seem to have a balance use of the
inputs. In other words, farms are not organizing the production process with over- or
under-exploiting any inputs. For this reason, farmers are acting rationally. Despite the
fact that no input reaches the top of TE (TE=1), this is an important result considering
the constraints imposed by the park and by the regulation in using the inputs, espe-
cially land.
Imposing non-increasing return to scale (NIRS), it is possible to assess the farms’ per-
centage under increasing (IRS), decreasing (DRS), and constant (CRS) return to scale
(Table 6). In case of decreasing return to scale (DRS), farms are oversized with respect
to their production, meaning that they are using too much input for the value of the
output they are obtaining. On the contrary, in case of increasing return to scale (IRS),
farms could increase the use of their inputs to increase more proportionally the output.
In both livestock and crop farms, as well as in the overall sample, most of the farms are
operating under IRS (Table 6). This result is coherent with the single-input TE esti-
mates. Since no input is under- or overused, a balanced increase of all the inputs may
lead the farms to improve the TE.
Finally, Table 7 shows the t-test operated on demographic variables (AGE and
EDUC) and on economic variables (VALT, CONV and MULT). Despite farms seems
more efficient when they participate in SFSCs and when they have multifunctional agri-
culture, there is no significant differences, both for livestock and for crops. In other
words, in the case study, the diversification through SFSC and multifunctional agricul-
ture does not significantly improve the TE of the farms. At the same time, no signifi-
cance differences are found between farms with high percentage of young workers and
for educated farmers for both livestock and crops farms.
Discussion
The overall purpose of this study was to analyze the technical efficiency (TE) of periur-
ban farms. The analysis of TE is essential in sustainability studies, since TE emphasizes
the farmer’s decision-making, which in the end is the most important actor in fostering
its economic sustainability (De Koeijer et al., 2002; Gonçalves et al., 2009). In this
framework, considering that in the literature the diversification of the profit between
Table 6 Estimated return to scale by DEA

CRS IRS DRS
Sample (n. 44)
N. 10 26 8
% 22% 59% 18%
Livestock (n. 19)
N. 5 12 2
% 26% 63% 10%
Crops (n. 25)
N. 5 16 4
% 20% 64% 16%
Table 7 t-test statistics for livestock and crops for different strategies of commercialization and for
demographic variables; for the description of the code and the variables see Table 3
VALT yes VALT no p value
Livestock 0.77 0.79 n.s
Crops 0.89 0.86 n.s
MULT yes MULT no
Livestock 0.78 0.78 n.s.
Crops 0.84 0.90 n.s
CONV yes CONV no
Crops 0.90 0.85 n.s
AGE yes AGE no
Crops 0.86 0.88 n.s
EDUC yes EDUC no
Crops 0.85 0.89 n.s
different food chains and sectors is considered as a way to sustain the farming economy
in periurban areas, this study has also assessed whether the farms’ participation in SFSC
and multifunctional agriculture affects the level of their TE. To be able to compare dif-
ferent farming systems localized in the same area and under the same political umbrella
of an agri-park the study employed a data envelopment analysis (DEA) (Lansink et al.,
2002). By the use of this model, it is possible to properly capture the heterogeneity in
terms of the different farming systems—crops and livestock—and the different types of
economic diversification, in order to provide specific insights for the policies carried
out in the area. The novelty of this study relies on the fact that this is the first time that
the DEA is applied in contexts of European PFS and using data from case study analysis
and direct farm interviews. In this situation, the collecting of data led to have small
sample. Nevertheless, analysis based on semi-structure interviews has the benefit to
specifically picture the actual territorial situation of the farming system, which in the
end is useful for both researchers and policy makers.
As in this study, literature has already compared the TE of livestock and crop farms
in European countries (Latruffe et al., 2004; Hadley, 2006). Our studies go further, since
beyond the identification of TE, it also identifies differences in the productivity between
livestock and crops, as proposed by Lansink et al. (2002). By doing that, this study pro-
vides an important methodological insight. Since the model applied in this study does
not assume any technological ground of the farming systems localized in one area, it
resolves the issue of comparing TE of different farming systems localized in the same
area. In this way, it contributes to the possibility to develop a territorial perspective in
TE analysis. In fact, when the comparison between farming system is carried out, the
only observation of the farms’ TE scores does not resolve the question: are the differ-
ences in the performances related to the TE in itself, to a less productive technology, or
both? (Mayen et al., 2010; Madau et al., 2018). Since our sample was composed of two
farming systems localized in the same area, it is not enough to talk about TE, but we
must also consider the different technological grounds they have. The statistical
significant difference between the crop and livestock farms’ productivity indexes result-
ing from our analysis suggests that any difference between the level of TE between
them relies on the technology farmers have at disposition and not on the farmers’
decision-making. At the same time, the analysis of the input-related TE shows that
farmers are rationally using their inputs. In other words, according to our results, in
the case study, farmers are well managing their farms. This is an important result con-
sidering our case study: it means that even if the permanence in an agricultural park
may imply that farms need to adhere to rules and regulations (Perrin et al., 2018), this
does not affect the way farmers allocate their resources among the inputs.
Considering the productivity of the two farming systems, the results suggest that in the
PASM crop farms should invest in technologies more productive, which will result in a
shift of the production frontier. In fact, the introduction of a technological innovation in a
production system determines an improvement of its production capacities. On the con-
trary, the technologies applied on livestock farms have more potential than the technolo-
gies of crops to produce food using lower amount of inputs. This can be probably due to
the fact that in the area livestock farms are highly specialized, while most of the crop
farms combine permanent rice and other crops. The high specialization of livestock may
also justify their less sub-group efficiency compared to crops. This is coherent with other
studies, where less-specialized farms are generally more efficient than the more-
specialized ones, perhaps because the more-specialized farms are less able to adapt to
changing market and policy environments (Hadley, 2006).
In our study, even if the inputs are rationally used, findings suggest also that no in-
puts are used at their maximum capacity. In other words, there are spaces for improve-
ments for all the three inputs: labor, land, variable costs. In the case of labor or variable
costs, it is possible to conceive ways to further exploit their use, for example, by in-
creasing the professional competences of workers. In fact, our results show that surpris-
ingly the level of education does not significantly improve the level of efficiency, while
usually in literature a high level of education is usually associated with higher scores of
TE (Latruffe et al., 2004). In order to improve the effect of the labor in improving the
TE, we suggest that specific actions on education for professional farmers and em-
ployers could improve the level of efficiency, especially for livestock producers.
On the contrary, giving the case study an increasing use of land is almost impossible.
The land in the metropolis’ periurban fringe is a very scarce good: even when the agri-
culture is highly productive and efficient, as our results seem to suggest, the competi-
tion between different urban and agricultural purposes and between farmers makes it
difficult for farmers to grow their surfaces. Moreover, the PASM area is considered as a
vulnerable area for the EU Nitrates Directive, and the use of land is already strictly
monitored and regulated, with limitations for farmers to use the land (Gaviglio and Pir-
azzoli, 2013).
Finally, this study is a preliminary analysis of the link between the economic diversifi-
cation and TE in the frameworks of agro-urban projects. To our knowledge, no study
has been carried out in PFS context, despite the fact that many scholars and institu-
tional bodies have proposed SFSC and multifunctional agriculture as a way to maintain
a sustainable farming system in metropolitan areas (Aubry and Kebir, 2013; Paül and
Mackenzie, 2013). In our study, results suggest that the decision to sell in local markets
does not induce distortions in the TE of periurban farmers, both for livestock and
crops. In other words, the decision to sell in local markets is not a critical factor wors-
ening the performance of farmers, as coherently with the few studies done on the sub-
ject in rural areas (Lohr and Park, 2010; Bauman et al., 2019). At the same time,
according to our results, the participation in SFSC and multifunctional agriculture is
not a factor in improving the efficiency for both livestock and crop farms. Thus, a ques-
tion remains on how to make these activity drivers improve the technical efficiency and
thus the economic sustainability. This result is relevant for the case study, since several
actions in the PASM have been planned by public bodies to offer possibility to diversify
the economy and improve the profitability of farms as a possible counterpart to urban
sprawl (Heimlich et al., 2001). This result is coherent with previous studies which ob-
served that in the area multifunctional activities were carried out more as a way to so-
cially accept the presence of agriculture around the metropolis (Paül and Mackanzie,
2013) than to enhance the real economic sustainability of farms (Gaviglio et al., 2014).
Policy actions should thus provide actions to better enhance the technical efficiency of
farms that diversify their economy in different sectors and different food chains. In this
way, those activities can effectively be a tool for the economic development of periur-
ban farms and not just as a temporary activity where farmers may risk losing the effi-
cient use of the inputs. The differentiated analysis on farming systems allows policy
makers to identify what the effective needs of farms are to improve economic develop-
ment. The more farms remain, the more peri-urban system is active and dynamic, cap-
able of adapting to local changes.
Conclusion
To conclude, this analysis provides new insights on the TE and the productivity of
farms at territorial scale. To our knowledge, this is the first time that the methodology
has been applied in comparing farming systems at territorial scale. Results suggest that
farmers of both crops and livestock farms rationally used their inputs, and they reach
high levels of efficiency. Nevertheless, there is space to improve the TE, for example by
improving the production technology in case of crops. The study also provides a pre-
liminary analysis on the possible impact of SFSC and multifunctional agriculture on TE
and resulting that at the moment they do not have an impact. Further analysis should
deepen this issue, comparing the performances in terms of TE and productivity be-
tween different farming systems and production methods, and in different places, such
as periurban and rural areas. In this way, it could be possible to further specify the con-
ditions of the farm TE and to in the end foster their sustainability. The results of this
analysis are valid for the case study, so we encourage other case study analysis to
deepen the studies on TE at territorial scale. Considering the increasing policy actions
addressed to PFS, a deeper knowledge of the agriculture performed around cities and
the conditions for its economic sustainable maintenance is needed.
Abbreviations
PFS: Periurban farming system; PASM: South Agricultural Park of Milan; SFSC: Short food supply chains;
CFC: Conventional food chains; TE: Technical efficiency; DEA: Data envelopment analysis; UAA: Usable agricultural area;
DMU: Decision-making units (s); CRS: Constant return to scale; VRS: Variable return to scale; SE: Scale efficiency;
IRS: Increasing return to scale; DRS: Decreasing return to scale; NIRS: Non-increasing return to scale
Acknowledgements
Not applicable
Authors’ contributions
All authors in this paper variously contributed to the data collection, data analysis, and/or write-up of the manuscript.
All authors read and approved the final manuscript.
Funding
Piano Sviluppo Ricerca 2018 Linea 2 Azione A e Azione B, Università degli Studi di Milano.
Availability of data and materials

The datasets generated and/or analyzed during the current study are not publicly available due to privacy, but are
available from the corresponding author on reasonable request.
Competing interests
The authors declare that they have no competing interests.
Author details
1
Department of Health, Animal Science and Food Safety, University of Milan, Via Celoria, 2, 20133 Milano, Italy.
2
Department of Agricultural Sciences, University of Sassari, Viale Italia 39/A, 07100 Sassari, Italy.
Received: 11 October 2019 Revised: 24 March 2020

Accepted: 28 January 2021
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Technical Efficiency and Productivity of Farms: A Periurban Case Study Analysis

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Gaviglio et al.

Agricultural and Food Economics (2021) 9:11

RESEARCH Open Access

Technical efficiency and productivity of

Economic sustainability, technical efficiency, and productivity of farms

Materials and methods

Fig. 1 Case study. The points identify the farms

systems as belonging to two different frontiers (TEg). According to Lansink et al.

Table 3 Efficiency analysis results from DEA

Table 4 Estimation of TE by data envelopment analysis (DEA)

Table 6 Estimated return to scale by DEA

Availability of data and materials

Received: 11 October 2019 Revised: 24 March 2020

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