The role of pest pressure in technical and environmental inefficiency analysis of Dutch arable farms: an event-specific data envelopment approach

This article provides estimates of farm technical and environmental inefficiency that recognize the effect of pest pressure on farmers’ production environment. This effect is modeled through the use of an event-specific production technology, which is empirically implemented using Data Envelopment Analysis (DEA). A regional biodiversity variable and two variables reflecting impacts of pesticides on farmland biodiversity are used to partition the data into high and low pest infestation events. The DEA representation is applied to data from Dutch arable farms. Results show that the degree of inefficiency overstatement from a model that ignores the event-specific nature of the production technology increases with pest infestation. Mean environmental inefficiency of the sample farms is low, implying that these farms are, on average, minimizing their impacts on farmland biodiversity. Environmental inefficiency provides an indicator of farm-level environmental sustainability that could help towards a more effective distribution of farm-support payments and make agriculture more environmentally sound.