Drivers of Productivity Change in the Italian Tomato Food Value Chain

Abstract

This study evaluated productivity dynamics and identified sources of productivity growth in Italian tomato production and processing. We used a stochastic frontier input distance function with four error components—heterogeneity, statistical noise, persistent and transient inefficiency—and a four-step estimation procedure with a system generalized method of moments (GMM) estimator in the first step to address the endogeneity problem. The results reveal significant differences in the productivity and efficiency of tomato production and processing. Moreover, there are considerable differences among the different sizes of tomato producers, with the main variations observed for scale efficiency. While tomato processors operate at an optimal production size, tomato producers are characterized by considerable economies of scale, especially small producers. These results thus suggest that there is significant opportunity for technical efficiency improvements at both stages of the value chain. Finally, due to improvements made to scale efficiency, extensive productivity growth was observed for the group of small tomato producers.