An Approach to Assess the Governance Efficiency of Bulgarian Farms

Abstract

There have been continuous debates about the essence and levels of efficiency of farms and agrarian organizations, with an increasing focus on governance aspects in recent years. Nevertheless, most of the existing assessments are at a conceptual or qualitative level due to well-known “measurement” problems related to transacting costs. This article incorporates the New Institutional and Transaction Costs Economics framework and suggests a practical approach for assessing the level and factors of governance efficiency of Bulgarian farms as a whole and of different types and locations. The evaluation of governance efficiency of the country’s farms is made on the basis of original micro-data collected by the managers of typical farms. The “Nature of the problems in effective organization for major class farm transactions for securing needed factors of production and marketing of output” is used as an indicator for the comparative efficiency (equal and greater compared to another farm/s or organisation/s) of individual farms. The study has found that the governance efficiency of farms is at a Good level but 60% of all farms in the county are with a Low efficiency and will likely cease to exist in near future. Major factors for inferior governance efficiency of Bulgarian farms are unsatisfactory efficiency in Supply of Necessary Labour, Innovations and Know-how, and Funding. There is a huge variation in the level and factors of governance efficiency of farms with different juridical types, sizes, product specializations, and geographical and ecological locations as well as in the share of farms with different levels of efficiency in each group. Also, there is a big discrepancy between the new assessments with dominating traditional approaches based on factors productivity. The suggested approach has to be further improved, and widely and periodically applied in economic analysis at various levels which require systemic collection of a novel type of micro-data on farms governance and transaction costs.