Agric. Econ. - Czech, 2024, 70(8):395-405 | DOI: 10.17221/99/2024-AGRICECON

Do peers and agglomeration affect farm efficiency?Original Paper

Sunhyung Min1, Kwansoo Kim2
1 Center for Agriculture Policy Evaluation, Korea Rural Economic Institute, Naju-si, Republic of Korea
2 Department of Agricultural Economics and Rural Development, College of Agriculture and Life Sciences, Seoul National University, Seoul, Republic of Korea

This study investigates peer effects and agglomeration impacts on the cost efficiency of South Korean rice farms using a five-year panel dataset of production costs. We employed a time-varying stochastic frontier cost function approach to estimate cost efficiency and a linear-in-means model to quantify peer influences. The findings underscore peer effects as central to understanding and enhancing farm productivity, particularly in rice farming regions. Both specialisation and diversity of agglomeration positively influenced efficiency, with specialisation having a larger impact. Peer effects were stronger in highly rice-specialised areas. These findings indicate the necessity of incorporating peer influences and regional specialisation in agricultural policymaking for productivity enhancement. A nuanced, evidence-based approach leveraging peer dynamics and agglomeration economies is advocated to boost the efficiency of farming practices.

Keywords: agglomeration economies; cost efficiency; peer effects; stochastic frontier approach

Received: March 13, 2024; Revised: July 21, 2024; Accepted: July 30, 2024; Prepublished online: August 16, 2024; Published: August 30, 2024  Show citation

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Min S, Kim K. Do peers and agglomeration affect farm efficiency? Agric. Econ. - Czech. 2024;70(8):395-405. doi: 10.17221/99/2024-AGRICECON.
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