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2014 Spring - Setting the Score for Agricultural Competitiveness

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FPJ1103C - Latruffe, L (2014), Competitiveness in the Agricultural Sector: Measures and Determinants

Latruffe, L (2014), Competitiveness in the Agricultural Sector: Measures and Determinants, in Farm Policy Journal, Vol. 11, No. 3, Spring Quarter 2014, pp. 9-17

This article analyses the various measures and potential determinants of competitiveness in the agricultural sector. Competitiveness is a broad concept and there is no consensus on how it should be defined, nor how to measure it precisely. It is however acknowledged that measurements can be made according to two disciplines: i) neoclassical economics which focuses on trade success and measures competitiveness with the real exchange rate, comparative advantage indices, and export or import indices; and ii) the strategic management school which emphasises a firm’s structure and strategy, and includes measures such as profitability, productivity and efficiency. However, most authors recognise that no single indicator is sufficient to assess the broad issue of competitiveness, particularly as each indicator has its limitations.
Two groups of determinants may influence farm competitiveness: determinants on which farms or firms have control, and determinants over which they have none. The former include structural characteristics such as size, organisational type and level of indebtedness, as well as social capital such as the farmer’s age and education level. Conflicting findings about the outcomes of these determinants are provided by existing studies. The determinants beyond farm control include factor endowments and demand conditions, government intervention and public expenditure in research, extension and infrastructure, as well as the location of the farm activities. The problem with government intervention is that it may change competitiveness superficially without increasing real competitiveness.
While this article, as well as the existing literature, focuses on price or cost competitiveness, the non-price component of firms’ or farms’ competitiveness (product differentiation, quality, design, novelty, reputation, reliability, etc) is an important aspect in gaining market share and sustaining profits, which should not be forgotten.



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