Impact of Trade Openness on Technical Efficiency: Agricultural Sector of the European Union

Abstract

This thesis examines the impact of trade openness (TOP) on technical efficiency (TE) in the agricultural sector of the European Union (EU). The hypothesis is that TOP, the share of agricultural imports and exports relative to agricultural GDP, can increase TE. The objective is to add to the limited number of studies focused on the impact of TOP on TE by inspecting an unexamined group of countries, the EU. Results show that TOP leads to an increase in TE over time. However, an instantaneous decrease in efficiency is observed. This outcome contributes to the mixed results found when examining the relationship between TOP and TE in the agricultural sector, industrial sector, and aggregate GDP. Past studies examining the agricultural sector have not found a significant impact of TOP on TE, a result indicative of the benefits the Common Agricultural Policy (CAP) provides for member states of the EU.