Separating Technical Change from Time-Varying Technical Inefficiency in the Absence of Distributional Assumptions (original) (raw)

Parametric Measurement of Time-Varying Technical Inefficiency: Results from Competing Models

2009

Abstract This paper provides an empirical comparison of time-varying technical inefficiency measures obtained from the econometric estimation of different specifications of the stochastic production frontier model. Specifically, ten different frontier model specifications, which are most widely used in empirical applications, are estimated using a balanced panel data set from the Greek olive-oil sector, consisting of 100 farms observed during 1987-93 period.

Estimation of Technical Inefficiency in Production Frontier Models Using Cross-Sectional Data

In this paper, we discuss the specification and estimation of technical efficiency in a variety of stochastic frontier production models. The focus is on cross-sectional models. We start from the basic neoclassical production theory and introduce technical inefficiency in there. Various model specifications with several distributional assumptions on the inefficiency component are explored in detail. Theoretical and empirical issues are illustrated with empirical examples using STATA.

Decomposition Measures of Technical Efficiency for Ontario Dairy Farms

Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, 1990

Technical efficiency measures for Ontario dairy farms are computed and decomposed into purely technical, congestion and scale efficiency measures using a non-parametric programming approach. Approximately 42% of the farms in the sample are technically efficient, while the major sources of inefficiency for the remaining farms are due to pure technical allocation and to non-optimal scale of production. A censored regression indicate that herd size, milk yield and butterfat content of milk has a positive influence on efficiency, while negative effects are found from the proportion of total feed purchased and overcapitalization. The variation in optimal scale between herd sizes implies a range of farm sizes will continue to exist, provided the appropriate technology for the scale of operation is chosen.

Econometric Estimation of Technical and Environmental Efficiency: An Application to Dutch Dairy Farms

American Journal of Agricultural Economics, 1999

In this article we estimate the technical and environmental efficiency of a panel of Dutch dairy farms. Nitrogen surplus, arising from the application of excessive amounts of manure and chemical fertilizer, is treated as an environmentally detrimental input. A stochastic translog production frontier is specified to estimate the output-oriented technical efficiency. Environmental efficiency is estimated as the input-oriented technical efficiency of a single input, the nitrogen surplus of each farm. The mean output-oriented technical efficiency is rather high, 0.894, but the mean input-oriented environmental efficiency is only 0.441. Intensive dairy farms are both technically and environmentally more efficient than extensive farms.

Estimation of technical inefficiency effects using panel data and doubly heteroscedastic stochastic production frontiers

Empirical Economics, 2003

In previous studies, measures of technical ine¢ciency e¤ects derived from stochastic production frontiers have been estimated from residuals which are sensitive to speci…cation errors. This study corrects for this inaccuracy by extending the doubly heteroscedastic stochastic cost frontier suggested by Hadri (1999) to the model for technical ine¢ciency e¤ects in a stochastic frontier production function for panel data proposed by Battese and Coelli (1995). The correction for heteroscedasticity is supported by the data. The study uses, for illustration of the techniques, data on 101 mainly cereal farms in England. We provide both point estimates and con…dence intervals for technical e¢ciencies. The con…dence intervals are constructed by extending the "Battese-Coelli" method reported by Horrace and Schmidt (1996) by allowing the technical ine¢ciency to be time varying and the disturbance terms to be heteroscedastic. The con…dence intervals reveal the precision of technical e¢ciency estimates and show the de…ciencies of making inferences based exclusively on point estimates.

Estimating technical efficiency of Australian dairy farms using alternative frontier methodologies

2006

In this paper we estimate and examine technical efficiency for a cross-section of Australian dairy farms using various frontier methodologies; Bayesian and Classical stochastic frontiers, and Data Envelopment Analysis. Our results indicate technical inefficiency is present in the sample data. We also identify statistical differences between the point estimates of technical efficiency generated by the various methodologies. However, the rank of farm level technical efficiency is statistically invariant to the estimation technique employed. Finally, when we compare confidence/credible intervals of technical efficiency we find significant overlap for many of the farms' intervals for all frontier methods employed. Our results indicate that the choice of estimation methodology may matter, but the explanatory power of all frontier methods is significantly weaker when we examine interval estimate of technical efficiency.

Technical Efficiency in Portuguese Dairy Farms

2008

This paper addresses issues related to efficiency measurement from an empirical point of view. A stochastic frontier production model using a translog is estimated for a group of Portuguese dairy farms. Farm level survey data for the period 1988 -2005 is used. Stochastic Frontier estimates address behaviour across all periods so the empirical model allows for time varying efficiency as well as technical change. Previous empirical studies use either the value of production or the quantity of milk produced in a single output framework. The value of production approach bundles together decision regarding the quantity and quality components as well as CAP subsidies. Using both approaches for the same data set produce substantial differences in efficiency measurement. The analysis shows that while farmers are quite efficient maximizing quantity produced they are much less efficient when allowing for quality. Sensitivity of estimates to the heterogeneity of the panel data sample as well a...

Technical Efficiency in the Sheep Dairy Industry: an Application on the Sardinian (Italy) Sector

2011

Abstract Sardinia (Italy) is one of the most important European regions for sheep dairy and sheep milk cheese production. However the Sardinian sheep dairy industry is currently going through a dramatic crisis, and verifying whether it can recover part of its profitability is now a priority. Attention is now focused on estimating whether the sheep dairy firms can improve their productivity by more efficient use of their available technical resources. This paper aims to estimate technical efficiency in the Sardinian sheep dairy industry.

A comparison of stochastic frontier approaches for estimating technical inefficiency and total factor productivity

Applied Economics, 2011

This article compares standard stochastic frontier models for panel data with a number of recently developed models which attempt to control for unobserved heterogeneity in the inefficiency component. Results are used to construct a generalized Malmquist Total Factor Productivity (TFP) index for the Irish tillage sector. While our application yields similar general TFP trends across models, it is evident that this new class of model leads to fewer theoretical inconsistencies in the production frontier. Furthermore, inefficiency estimates across models are critically compared and the potential benefits of controlling for unobserved heterogeneity are highlighted.

The Analysis of Technical Efficiency for Small Dairy Farms in Southern Chile: A Stochastic Frontier Analysis with Unbalanced Panel Data

This paper uses a stochastic production frontier model to measure technical efficiency and technological change for a sample of small dairy farms in Southern of Chile. The data is a highly unbalanced panel including 48 farmers with a total of 92 observations covering the period from 1996-97 to 2001-02. All farmers in the sample are members of the Paillaco Farm Management Center (FMC). In the preferred model, the inefficiency term has a half-normal distribution, there is no agro-climatic effect, the presence of technical inefficiency is highly significant and technical efficiency is time variant. Average technical efficiency ranges from 77% (1996-97) to 69% (2000-01). Technological change is significant and increases at an average annual rate of 1.08% for the period (1996)(1997)(1998)(1999)(2000)(2001)(2002). On average, small dairy farmers in Southern Chile (Paillaco) are operating at a sub optimal size given that the computed returns to size parameter is equal to 1.12.