West vs East: How Different Is Performance in European Winemaking

Abstract

This paper aims to find out how much the performance of winemaking has changed during the last decade and what are the main differences of winemaking productivity in the East and West of Europe. Using a sample of Spanish and Ukrainian wineries between 2008 and 2016, the authors estimated productivity change and its decomposition into efficiency change and technological change using Malmquist total factor productivity indices and DEA. Generally, results show a slight increase in total factor productivity in both countries, which is more dynamic in Ukraine. Furthermore, this growth is explained by the confluence of two factors acting with contrary signs. On the one hand, a decrease in wineries’ efficiency derived from their wrong management. On the other hand, a positive improvement in productivity as a consequence of a frontier shift, which is interpreted as technical change. Despite the huge gap in living standards and economic development between Western and Eastern Europe, authors found a shrinking gap in the capital productivity in winemaking of Spain and Ukraine. Together with the positive technological changes this gives hope on improving investment attractiveness of winemaking business in Eastern Europe, but also leaves Spain good chances on further efficient development of winemaking.