Contract Farming and Technical Efficiency: Evidence From a Stochastic Frontier Analysis of Greek Durum Wheat Farms

Abstract

This study investigates whether participation in contract farming improves the technical efficiency of durum wheat producers in Greece. Drawing on farm‐level survey data for 338 contract and non‐contract farmers in Central Greece, it examines the extent to which vertical coordination contributes to improved farm performance in the production of a high‐value staple crop. Technical efficiency is estimated with a translog stochastic frontier model, while propensity score matching is used to reduce the association between observable selection bias and participation in contract farming. The results indicate that both contract and non‐contract farmers operate at relatively high levels of technical efficiency. Nevertheless, contract farmers achieve a significant efficiency increase of 0.89 percentage points (93.39% vs. 92.50%). Although this difference is modest in absolute terms, it represents a consistent improvement in efficiency within an already highly productive farming environment. The findings suggest that the benefits of contract farming stem primarily from better input coordination, enhanced managerial discipline, and lower levels of technical inefficiency, rather than from major changes in production technology. By providing evidence from a developed European agricultural setting, this study extends the existing literature on contract farming to strengthen farm performance and improve the functioning of agri‐food value chains.