Does Agro-Eco Efficiency Matter? Introducing Macro Circular Economy Indicator into Profitability Modeling of Serbian Farms

The transition toward sustainable and circular agricultural systems is increasingly important, yet evidence linking circularity and farm profitability in transition economies remains limited. This study examines the determinants of farm profitability in Serbia by combining micro-level structural and productivity indicators with a macro-level agro-eco efficiency measure, used here as a sector-wide ecological pressure indicator rather than a direct proxy for circular practices. Using a balanced Farm Accountancy Data Network (FADN) panel of 443 farms (2015–2022) across dairy, mixed, field crop, and fruit & wine sectors, dynamic panel estimators (difference and system Generalized Method of Moments-GMM) reveal strong sectoral heterogeneity. Asset turnover is the primary driver of profitability in field crops and perennial systems, while dairy farms benefit from scale and land productivity. Energy intensity consistently reduces profitability across all sectors. Agro-eco efficiency shows a negative effect in livestock-based systems, indicating higher sensitivity to macro-ecological pressures. These findings suggest that environmental and economic vulnerabilities differ across production systems, highlighting the need for sector-specific strategies aimed at improving resilience rather than inferring the profitability of circular technologies.