Managerial capacity builds over the years and the accumulated knowledge and practice affect the outcome of the period that follows, with long-run/permanent effects on inefficiency. Therefore predictions of the influence of managerial capacity on the time-varying inefficiency, regularly estimated as overall efficiency, may be biased. This study analysed the influence of farm management practices on both the persistent and overall efficiency.
The empirical application in the study was pig farms in Sweden. Data from the Swedish Farm Accounting Survey (FAS) 2002-2012 and information from a survey related to managerial practices in Sweden were used. The results suggest that managerial practices shape/are related with the permanent efficiency of farms. Managerial experience, agricultural education, and economy-driven goals were found to have positive effect, whereas managerial courses, use of updated budgets, and PigWin software were found to be positively related with the persistent efficiency on the farms. Farmers’ focusing on meeting market demand in terms of quality was found to be negatively related with the persistent efficiency. Overall technical efficiency was positively related only with the use of PigWin software, therefore a hidden causality effect on overall technical efficiency was obtained for managerial experience, agricultural education and economy-driven goals.