Measuring and explaining scale efficiency with the parametric approach: the case of Greek tobacco growers

Estimates of technical and scale inefficiencies of tobacco farms in Greece during the period 1991-1995 are obtained by using the parametric approach. The degree of technical efficiency was found to be lower than the degree of scale efficiency and thus a greater portion of overall inefficiency is due to producing below the production frontier than to producing at an inefficient scale. In addition, the vast majority of farms in the sample exhibited suboptimal scale implying that output should be expanded to reach the optimal scale. Empirical results are provided to determine the impact of various socioeconomic, demographic, and geoclimatic indicators on technical and scale efficiency.