Exploring technical efficiency in the European forest sector: A two-stage chance-constrained data envelopment analysis

This study analyses the technical efficiency of the forestry sector in Europe which comprises 40 countries. The novelty of this study is the stochasticity of the data and the existence of contextual variables in the two-stage production process of the forest sector. We first developed a two-stage chance-constrained data envelopment analysis model in which the forestry and exploitation stages occur at country-specific levels within the European forest production sector. It was found that the forest management stage is generally more efficient than the exploitation stage and total production at the country-specific level. Contextual variables have a significant impact on efficiency scores, which means that efficiency calculations in the subsequent stage need to be adjusted to take these influences into account. By mitigating these contextual effects, the study improved technical efficiency scores, highlighting top performers like the Russian Federation (DMU31 in North zone), Switzerland (DMU37 in Central-West zone), and Iceland (DMU16 in North zone) with TE scores of 1.0322, 1.0209, and 1.0198 respectively, while also identifying areas for enhancement in countries such as Turkey (DMU38 in South-East zone), Slovakia (DMU33 in Central-East zone), and Romania (DMU30 in Central-East zone) which fall into the lowest three ranks based on their performance with TE scores of 0.5583, 0.5058, and 0.4482 respectively. An important conclusion is that these findings are crucial for policymakers and stakeholders in Europe when developing strategies to improve efficiency and sustainability in the forest sector.