Analyzing commercial grape farm efficiency in Armavir region (Armenia) by using two-stage empirical approach

Abstract

The purpose of this paper is to provide an empirical assessment of the economic efficiency of grape-producing farms in Armenia. Upon reviewing various field-related studies the frontier analysis was singled out as a methodological base of this study. More specifically two-stage empirical analysis was performed, which includes the measurement of efficiency levels of grape farms by implementing the DEA technique and then assessing the determinants of obtained efficiency scores by performing Tobit modeling. To obtain necessary data, 365 grape farms from the Armavir region were surveyed. The main findings of this paper suggest that the average efficiency score for grape farms is 0.72, and there is room for improvement in the economic performance of farms with 28%. The main determinants of farm efficiency were cultivated grape varieties, farm size, and selling prices of grapes. The obtained results mainly support the findings of similar studies carried out for various viticulture regions across the world. This study provides some methodology bases for further expansion of similar studies both in terms of including the other Armenian viticulture regions and different years to explore the changes in the efficiency of grape farms over time. This article provides a base of knowledge for policymakers, scholars, researchers, investors, and credit companies for their decision-making processes and other purposes.