A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms

This article investigates farm-level efficiency of U.S. dairy farmers by estimating their technical and allocative efficiency. Technical inefficiency is assumed to be composed of a deterministic component that is a function of some farm-specific characteristics and a random component. By doing this...

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Bibliographic Details
Published in:Journal of business & economic statistics 1991-07, Vol.9 (3), p.279-286
Main Authors: Kumbhakar, Subal C., Ghosh, Soumendra, McGuckin, J. Thomas
Format: Article
Language:English
Subjects:
Agriculture
Allocative efficiency
Allocative inefficiency
Crop economics
Crops
Dairy farming
Dairy industry
Deadweight loss
Economic efficiency
Efficiency
Farm economics
Farms
Industrial agriculture
Input output analysis
Production
Production estimates
Production functions
Resource allocation
Returns to scale
Statistical analysis
Stochastic models
Studies
Technical inefficiency
U.S.A
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Summary:This article investigates farm-level efficiency of U.S. dairy farmers by estimating their technical and allocative efficiency. Technical inefficiency is assumed to be composed of a deterministic component that is a function of some farm-specific characteristics and a random component. By doing this we extend the stochastic frontier methodology in which determinants of technicial inefficiency are explicitly introduced in the model. Given the inputs, variations in efficiency of farms are then explained by both deterministic and random components of technical inefficiency. The empirical results indicate that (a) levels of education of the farmer are important factors determining technical inefficiency and (b) large farms are more efficient (technically) than small and medium-sized farms. Both technical and allocative inefficiency are found to decrease with increase in the level of education of the farmer.
ISSN:0735-0015
1537-2707
DOI:10.1080/07350015.1991.10509853