Seonghyeon Park (p)

Alexander Kaiser

South Korea’s agricultural sector is facing a dual crisis: intensified external competition resulting from Free Trade Agreements (FTAs) and internal structural challenges such as rural depopulation, aging, and the feminization of agriculture. These issues have led to severe labor shortages and declining agricultural productivity. In response, the Korean government has promoted farm mechanization as a strategic solution, with local governments implementing specific policies such as agricultural machinery rental programs.
This study empirically investigates the effectiveness of farm mechanization and its associated policies as a sustainable response strategy. Using data from nine provinces between 2010 and 2023, we analyze the impact of farm mechanization on total agricultural output. The analysis employs a Generalized Least Squares (GLS) regression model, controlling for key production inputs and demographic variables.
The results show a statistically significant positive relationship between farm mechanization and agricultural productivity, indicating that mechanization contributes to enhanced output. Interaction analysis further reveals that farm mechanization positively affects productivity among the elderly farming population, while it tends to negatively impact productivity among female farmers.
These findings empirically support the role of farm mechanization as a key strategy for sustainable rural development in South Korea and offer important implications for future policy design and improvement.

Alexander Kaiser (p), Axel Schaffer

Nicole Castro

Increasing agricultural productivity is often highlighted as crucial for balancing the growing demand for agricultural produce with resource conservation goals. Consequently, studies on agricultural production efficiency examine economies of scope, scale and other operational factors such as subsidy schemes to understand differences in productivity levels and identify best practices. Surprisingly, while environmental concerns receive sufficient attention in the nonparametric production analysis literature – either considered as excessive input usage, avoidable waste or undesirable byproducts – a comprehensive assessment of climate factors in explaining inefficiency variations remains largely absent. While the latter might be reasonable in studies dedicated to climate-insensitive farming systems or highly localized contexts, in regional analyzes, climate factors may be important determinants of an agricultural sector’s productivity. Moreover, they may interact with operational factors that are frequently cited as an explanation for inefficiencies relative to peers. Using a fully nonparametric conditional efficiency framework, we analyze the impact of various subsidy types (total subsidies, direct payments, environmental subsidies, and investment subsidies) and climate factors (evapotranspiration, radiation, precipitation, and temperature) on efficiency estimates for crop and mixed farming sectors across EU FADN regions from 2004 to 2021. This study further contributes to the literature by considering both a technical model - based on actual physical quantities of production inputs and outputs - and an operational model that incorporates monetary costs and gross results. To ensure robustness, we also explore differences in between input- and output-oriented specifications of the models. Our findings reveal a robust effect of varying climatic conditions on regional agricultural efficiency. In contrast, the influence of subsidies appears highly sensitive to model specification and cannot be fully disentangled from general size effects. Beyond this interaction with sectoral size, the conditional framework uncovers a more nuanced relationship between contextual variables and efficiency estimates. Pairwise nonparametric fits indicate a nonlinear relationship between climate factors and efficiency, which is limited to specific value ranges. These findings suggest that studies employing a semi-parametric two-stage approach may indeed have overestimated the role of subsidies in explaining inefficiencies in the past. Future research could benefit from acknowledging the complex interactions between both environmental and operational factors with regional agricultural efficiency more explicitly.

Aniela Carrara, Nicole Castro (p), Geraldo Barros, Fernanda Lisbinski, Daniel Amaral

Vítor João Pereira Domingues Martinho

The energy transition is a strategic response to the climate crisis and the need to diversify energy sources, with regulations and targets implemented globally but adapted to each country’s context. In 2023, biodiesel accounted for 46% of the combined global production of biodiesel and ethanol, a significant increase from just 7% in 2000; notably, the growth in biodiesel production contributed to 50% of the overall growth in the combined production of these two biofuels (Energy Institute Statistical Review of World Energy, 2024).
Brazil, a key player in the biofuels market, launched the National Program for Biodiesel Production and Use (PNPB) in 2004, mandating biodiesel blending with fossil diesel. The blend percentage increased from 2% in 2005 to 14% in 2024 and is set to reach 15% in 2025 under the new Future Fuel Law (Law No. 14,993), potentially rising to 25% in the coming years.
In 2024, soybean oil accounted for 72% of Brazil’s biodiesel production. The economics of soybean oil-based biodiesel involves complex market interdependencies due to the joint nature of soybean crushing. Oil extraction inevitably produces a large volume of soybean meal, which represents approximately 80% of the processed volume, even when oil is the main intended product. Biodiesel mandates create additional demand for soybean oil, which remains inelastic up to the mandated blending level; however, this also increases soybean meal supply, which, if demand remains unchanged, can drive down meal prices, reducing overall processing profitability. On the other hand, lower meal prices may stimulate its use in livestock feed, highlighting intricate interactions between food, fuel, and feed markets.
This study quantifies how soybean oil demand influences crushing, explicitly considering its link to soybean meal supply and pricing. First, we develop a theoretical model to describe the joint market equilibrium, capturing the interdependencies in the soybean complex. Second, and considering that food, biofuel, and energy markets exhibit significant nonlinearities, the empirical analysis employs a Time-Varying Parameter Vector Autoregressive Model (TVP-VAR), which accounts for evolving market relationships, using monthly data from September 2006 to September 2024.
This research contributes to the literature by addressing the still underexplored relationship between biodiesel policies and the soybean market. Findings will support more efficient supply chain planning and energy policymaking in Brazil. Additionally, analyzing Brazil’s soybean sector within the energy transition provides globally relevant insights, considering the country's role in renewable energy and international trade.

Vítor João Pereira Domingues Martinho (p)

Seonghyeon Park

In general, economic theory predicts constant or decreasing, returns to scale in the agricultural sector, nonetheless the literature shows that in some cases agriculture reveals evidence of increasing returns to scale. There are several explanations that can be presented for these findings, such as the modernisation of the sector, which implies a reduction in the employment used and an increase in the output obtained. This farming modernisation is linked to the use of synthetic fertilisers, mechanisation and, more recently, the use of digital technologies. On the other hand, the sector, like other economic sectors, is impacted by international events, namely economic crises, the Covid-19 pandemic and military conflicts, for example. The questions that arise here are how these trends and frameworks have effectively influenced the returns to scale in the agricultural sector worldwide, particularly in specific regions of the world. Taking this scenario into account, this research proposes to analyse increasing returns to scale in agriculture in specific world contexts, considering the developments in economic theory associated with Verdoorn and Kaldor’s laws. The results obtained reveal that agriculture has undergone relevant changes over the last few decades and years, with implications for the sector’s returns to scale, but these transformations have been asymmetrical in the different world regions.

Acknowledgments: This work is funded by National Funds through the FCT - Foundation for Science and Technology, I.P., within the scope of the project Refª UIDB/00681/2020 (https://doi.org/10.54499/UIDP/00681/2020). Furthermore we would like to thank the CERNAS Research Centre and the Polytechnic Institute of Viseu for their support.