3.1. Resources and Inputs of Production Factors in Agriculture—Their Ratios and Productivity
Land is the production factor playing a much greater role in agriculture than in the other sectors of the national economy. On the one hand, due to its purely natural character land is the least mobile and flexible resource among all the production factors, while on the other hand it is a rare good, which supply is limited, thus solely the ownership of land should constitute a source of income for the owner [
77,
78,
79]. In 2017 agriculture in the EU countries used 173.1 million ha UAA, of which almost 71.5% were concentrated in the EU-15 countries (
Table 1). The greatest resources of agricultural land were available in French and Spanish agriculture, having 27.8 million ha UAA and 23.2 million ha UAA, respectively, approx. 16% and 13.5% total UAA in the EU-28. Countries with considerable land resources included also Germany (16.7 million ha UAA), the United Kingdom (16.4 million ha UAA), Poland (14.4 million ha UAA) and Romania (12.5 million ha UAA), which jointly farmed on almost 35% total UAA in the EU-28.
An important element co-determining the production potential of the agricultural sector is connected with the number of persons employed. The level of employment and the land-to-labor ratio directly determine productivity and efficiency of labor (see e.g., [
80]), and as a result also the competitiveness of agricultural production both on the domestic and international markets. In 2017 in the agricultural sector of the EU countries employed almost 9.5 million people (
Table 1). The greatest resources of labor were found in the Romanian and Polish agriculture, which employed approx. 2.0 million and 1.7 million people, which jointly accounted for over 38% all employed in the agricultural sector of the EU-28. Among the EU-15 countries relatively high employment rates in agriculture were recorded in Italy (871 thousand people), Spain (819 thousand people) and France (698 thousand people).
The UAA in the USA comprised 364.3 million ha and was over 2-fold bigger than in the EU-28. Due to an almost 4.5-fold smaller number of employed, the UAA per 1 person employed in agriculture in the USA in 2017 was around 166.5 ha, being 9-fold higher than in the EU-28 (
Table 2, cf. [
30]). One person working in agriculture in the EU-28 farmed on average on approx. 18 ha UAA, while—excluding Cyprus and Malta—this area ranged from 6–9 ha UAA in Romania, Poland and Slovenia up to 42–44 ha UAA in Luxembourg, Denmark, Estonia, Ireland and the United Kingdom. In view of the above it means that a much greater concentration of the agrarian structure is found in the USA, thus promoting a greater labor productivity (
Table 3). Moreover, relatively large resources of land facilitate production of a lower capital consumption intensity, increasingly desirable as being environmentally friendly. This is reflected in the capital-land ratio. In 2017 in the USA the capital inputs per 1 ha UAA were over 3-fold lower than in the EU-28 countries, which resulted in proportionally lower productivity of land (
Table 2 and
Table 3). However, it needs to be observed here that while land productivity in the USA lower than in the EU countries is the matter of the farmers’ decision, in some farms in the EU-13 countries extensive agricultural production to a considerable extent results from the deficit of capital.
Inputs of fixed and current assets in the EU countries vary significantly. In 2017 the total value of capital inputs in the agricultural sector of the EU countries-28 amounted to 304.2 billion euro, of which over 83% were incurred by the EU-15 countries (
Table 1). The highest such inputs were recorded in France (53.7 billion euro), Germany (46 billion euro) and Italy (33.7 billion euro), which jointly accounted for almost 45% capital inputs in the EU agricultural sector. Considerable capital inputs, amounting to 7–9% their total value in the EU, were also observed in Dutch, British and Spanish agriculture. Among the Central and Eastern European countries (CEEC) the highest capital inputs in agriculture were incurred in Poland and Romania. Inputs reaching 16.8 billion euro and 12.1 billion euro accounted for as little as 5.5% and 4% total capital inputs in agriculture of the EU-28. The share of the other countries from that region in the total value of capital inputs in the EU agricultural sector was slight and did not exceed 2%.
Apart from the land assets, capital assets determined the labor productivity. In 2017 per 1 person employed in the US agriculture there were over 94 thousand of euro capital inputs, approx. 3-fold more than the average in the EU-28 and almost 9-fold more than in the EU-13 (
Table 2). In such countries as Romania, Poland, Bulgaria, or Croatia the value of capital inputs per 1 person employed ranged from as low as 6 thousand euro to 13.6 thousand euro, thus resulting in the low labor productivity in the sector (
Table 3). In 2017 the productivity of labor measured by agricultural production per 1 person employed in those countries ranged from 8 thousand euro in Romania, though 15 thousand euro in Poland to less than 19 thousand euro in Bulgaria and Croatia and it was 2- to 5-fold lower than in the EU-28 and 8- to 20-fold lower than in the USA. Among the EU-15 countries the lowest labor productivity was recorded in Greece and Portugal, but even in those countries 1 person employed contributed to the generation of 1.5- or 3-fold greater production outcomes than in the four above-mentioned EU-13 countries. The greatest productivity of labor, equal to that in the USA (157.5 thousand euro), was reached in Denmark, the Netherlands and Belgium, where 1 person employed manufactured from 3.5 to 4 times higher agricultural production than the average in the EU-28 and from 10 to 12 times higher than in the EU-13 countries.
Lesser disproportions both between the EU-28 and the USA and among the EU-28 countries were observed in terms of productivity of capital inputs involved in the production process. In 2017 in the EU-28 countries capital input of 1 euro contributed to the generation of 1.37 euro of agricultural production, which was by almost 20% less than in the USA (
Table 3). Among all the EU countries the highest value of production was generated by unit capital input in the agriculture of Spain (1.83 euro), Cyprus (1.67 euro), Malta (1.67 euro), Greece (1.61 euro), Poland (1.52 euro), Italy (1.51 euro), and Bulgaria (1.50 euro). An above-average productivity of capital was also recorded for the agricultural sector in Croatia, Hungary, Portugal, and Ireland. It may be observed that in many cases the high average productivity of capital inputs was attained in countries with low levels of capital inputs (
Table 1), which is consistent with the theory production, according to which efficiency of capital inputs is higher at their lower levels, while an increase in inputs in developed agriculture leads to a decrease in their efficiency [
82]. Similar regularities were also observed in the productivity of current assets, although at a lesser discrepancy of values between the EU-28 and the USA, but greater between the EU-15 and EU-13. This is of significance, particularly that while fixed assets are needed to run the production process, the income-generating role is played by current assets.
It results from the conducted analysis that the efficiency of production in agriculture, and as a consequence its competitiveness on the international scale, is to a considerable extent determined by the ratios between the production factors. This is a confirmation of the results presented in earlier studies by Baer-Nawrocka and Markiewicz [
22], Tarnowska [
83], Guth and Smędzik-Ambroży [
6], and Poczta et al. [
57]. It may be observed here that the EU agriculture is highly diverse in this respect. In such countries as Denmark, Germany, and France much greater resources of land and capital are available per one person working in agriculture than the average in the EU-28, while at the same time the level of capital inputs per a unit of land resources also markedly exceeds mean values. In Belgian and Dutch agriculture one person working in agriculture uses approximately the average UAA, but the above-average level is observed in the available resources of capital, while capital inputs per 1 ha UAA are also above-average. In most EU-13 countries the assets of capital resources available to persons working in agriculture is well below the average value and the level of capital inputs per 1 ha UAA is also less than average (cf. [
84]). Except for the capital-land ratio, a considerable gap in the case of the labor production factor is found in its assets of the other two production factors—land and capital, which divides the EU-28 and the USA, thus showing—in this reference system—the weakness of the production potential for the EU agriculture. In order to strengthen competitive advantages of farms in the EU countries, particularly those from the EU-13 countries characterized by lower productivity of land and labor than those from the EU-15 countries (for more on this see [
27,
30,
41,
55,
85,
86]), it is necessary to reduce the level of employment in agriculture, implement technical change and accelerate concentration processes, facilitating the beneficial effects of scale of production and its increased efficiency. In earlier studies these issues were indicated by Burja and Burja [
87], Rzeszutko and Kita [
25], Smędzik-Ambroży et al. [
41], Bórawski et al. [
88], or Hornowski et al. [
89]. It is also in line with the study by Špička and Smutka [
90], who found that especially in mixed crops and livestock farming the substitution of labor by capital (or hired labor) may significantly affect labor productivity and income. In turn, a positive relationship between the farm size and efficiency of the production factors was shown by Latruffe et al. [
91] and Bojnec and Latruffe [
92].
3.2. Identification of Types of Countries in Terms of the Production Potential in Agriculture
As described in
Section 2.2.2, three procedures of the tree-diagram division were applied. The maximum difference in the distance measure and the Grabiński measure were 3.40 and 2.60, respectively, thus indicating the division of the tree-diagram between the 18th and 19th or the 17th and 18th steps (
Figure 1) and leading to the isolation of 10 or 11 classes of analyzed countries (
Figure 2). Applying the rule proposed by R. Mojena, for parameter k = 1.25 the value of 4.46 was obtained, which suggests the position of the tree-diagram division after the 21st step and thus distinguishes 7 classes of countries. Considering the division of the tree-diagram at the linkage distance determined by the value of the Grabiński measure as the most accurate, eleven classes of countries were distinguished as differing in the structure, intensity, and efficiency of utilization of their production potential in the agricultural sector (
Figure 3). Values of class means for active characteristics are given in
Table 4, while
Table 5 gives values of the measure of differences between mean metrics, used to identify features characteristic to individual classes.
Table 6 presents characteristics of typological classes of the analyzed countries depending on the production potential of their agricultural sector.
Class 1 includes Poland, characterized by a high share of labor in total inputs—the highest in the investigated population of countries—at the simultaneous low UAA per 1 person employed in agriculture (
Figure 3,
Table 5 and
Table 6). A lower level of land assets for the labor production factor was recorded only in class 10 (
Table 4), composed of Croatia, Portugal and Greece, having much lower resources of land than Poland as well as Romania, in which 300 thousand people employed more worked on almost 2 million ha smaller total UAA than in Poland (
Table 1). It may be stated that due to the considerable resources of land and labor accumulated in Polish and Romanian agriculture their production potential is considerable in relation to the agriculture of the EU-28, and in terms of labor resources labor even compared to the USA. Nevertheless, it needs to be remembered that both land and labor resources are “potentially dormant”, which under advantageous external conditions may be effectively used, while under adverse conditions they will be a burden and will hinder development. The fragmented agrarian structure in those countries (see e.g., [
30,
87,
93,
94]), while not necessarily determining their production potential [
95], will nevertheless have a considerable impact and will negatively affect the level of labor productivity, thus influencing also the level and accumulation of income. In turn, a factor stimulating income of farms in Poland may be provided by the very high ratio of current assets to fixed assets—by 75% exceeding the average for all the investigated countries (
Table 4). A high ratio of current assets to fixed assets, by 50% exceeding the average for the analyzed population, was also recorded for Slovakia and Latvia constituting class 2 (
Figure 3,
Table 4). Importance of respective ratios between production factors modifying the financial situation of farms in the EU countries was already shown by Poczta et al. [
96]. They indicated that good levels of production factors, at their inappropriate ratios, do not guarantee advantageous financial effects, whereas smaller economic entities, but this time with more appropriate ratios between the production factors, may attain satisfactory values of financial indexes.
Class 3, which includes five EU-13 countries—Estonia, Lithuania, Czechia, Hungary, and Bulgaria, showed no particularly characteristic features compared to the other countries (
Figure 3,
Table 5 and
Table 6). When comparing this class to the entire investigated population we may observe the ratio of current assets to fixed assets and the productivity of current assets almost equal to the average, as well as lower assets of land and capital available to labor assets and average values of the other characteristics (
Table 4).
Class 4 comprises two Scandinavian countries—Sweden and Finland, in which the share of land in total inputs was 2-fold lower than the average for all the investigated countries, as well as the lowest productivity of current assets in the analyzed population (
Figure 3,
Table 4). The value of agricultural production obtained from 1 euro of current assets in those countries was 1.36 euro and 1.21 euro, respectively, and it was by approx. 20–30% lower than in the EU-28 and by 30–40% lower than in the USA (
Table 3). However, it results from a study by Kijek et al. [
40] that Sweden and Finland belonged to the EU-15 countries characterized by the strongest convergence processes of agricultural productivity.
Class 5 was composed of 1 element, the USA with a low share of labor in total inputs, but over 3.5-fold and 2-fold higher land and capital assets per 1 person employed compared to the average for the investigated population of countries (
Figure 3,
Table 4). The ratio of current assets to fixed assets in the USA was also by over 40% higher the average. As mentioned in
Section 3.1, advantageous ratios between production factors and a much more concentrated agrarian structure [
30] promoted high productivity of labor and capital in the US agriculture (
Table 3). It should be noted here that in 2017 in the USA farms with an area exceeding 105 ha UAA accounted for almost 25% all farms, but used almost 90% total UAA, while in the EU-28 less than 3% farms larger than 100 ha UAA concentrated almost 53% resources of agricultural land [
30]. This is corresponding to the study by Huffmann and Evenson [
97], who found that the structural change in the US agriculture related to farm size and specialization is an important source of total factor productivity growth both in crop and livestock production.
Class 6 included the United Kingdom and Ireland (
Figure 3), characterized by much higher share of land in total inputs than in the other classes (
Table 4,
Table 5 and
Table 6) as well as the highest UAA per 1 person employed in the EU-28 (
Table 2). It needs to be stressed here that approx. 63% total UAA in the United Kingdom and as much as 90% in Ireland were permanent grasslands used in extensive cattle rearing based on grazing [
58], which was reflected in land productivity by approx. 30% and 40% lower than the mean in the EU-28 and EU-15 (
Table 3).
Class 7 comprised Luxembourg, Germany, the Netherlands and France, while class 8 included Denmark and Belgium (
Figure 3) belonging to the group of most developed EU countries in terms of their GDP per capita measured in the purchasing power parity [
98]. Those countries incurred the highest capital inputs per 1 ha UAA and per 1 employed in the EU-28 (
Table 2), which contributed to the above-average productivity of land and labor within the EU-28 (
Table 3). The high agricultural productivity of the above-mentioned countries was also indicated by Cuerva [
99], Baer-Nawrocka and Markiewicz [
22], Nowak and Różańska-Boczula [
36], or Smędzik et al. [
41]. In view of the high level of capital assets per 1 person employed and the recorded level of labor productivity, those two classes of countries are likely to include those capable of meeting the competitive pressure exerted by the more concentrated US agriculture, benefitting from the appropriate ratios of production factors, and being more productive as a result.
Class 9 comprises Italy and Spain, in comparison to the other countries distinguished by the ratio of current assets to fixed assets being by 40% lower, at a 20% higher productivity of current assets (
Figure 3,
Table 4,
Table 5 and
Table 6). The level of capital inputs per 1 person employed in those countries was relatively low, which was connected with the specialization in plant production (fruit and vegetables, olives, vineyards), being more land- and labor-intensive rather than capital-intensive. The other EU countries of the Mediterranean region (Croatia, Portugal, and Greece) as well as Romania, similarly as countries from class 9 specializing in plant production, were assigned to class 10 (
Figure 3). In the investigated population they were distinguished by a low share of land, but a high share of labor in total inputs, comparable to that observed in in Poland and by over 30% higher than the mean for all the analyzed countries (
Table 4 and
Table 5). As was already mentioned, a relatively small UAA or excessive level of employment in in agriculture in relation to the available resources of agricultural land (
Table 1) resulted in this class in the lowest level of land assets per 1 person employed. Fragmentation of farms as well as high labor intensity and lower capital intensity of production in countries of Southern Europe, related with the production structure to a considerable extent focused on plant production promoted by the advantageous climatic conditions was indicated by Baer-Nawrocka and Markiewicz [
22].
Labor-intensive production of fruits, grapes and olives is also run in Slovenia, which together with Austria, being a leading organic producers in the EU [
100,
101], was classified to class 11 (
Figure 3). For this class, similarly as for classes 1 and 10, a typical characteristic was the high share of labor in total inputs (
Table 5 and
Table 6), whereas in contrast to them in Austria and Slovenia a low ratio of current assets to fixed assets was recorded (
Table 4), determining productivity of production factors lower than the EU-28 average (
Table 3).