Abstract
In parametric efficiency studies, two alternative approaches exist to provide an estimate of the long-run efficiency of firms: the dynamic stochastic frontier model and the generalised true random-effects model. We extend the former in order to allow for heterogeneity in the long-run technical efficiency of firms. This model is based on potential differences in firm-specific characteristics and in firms’ inefficiency persistence. The model is applied to an unbalanced micro-panel of German dairy farms over the period 1999 to 2009. Estimation of long-run technical efficiency and inefficiency persistence is based on an output distance function representation of the production technology and estimated in a Bayesian framework. The results suggest that heterogeneity in long-run technical efficiency of farms is mostly attributed to discrepancies in farm-specific factors rather than differences in farms’ inefficiency persistence. Farm size is positively related to long-run technical efficiency while subsidies exert a negative effect on the long-run technical efficiency of farms. Inefficiency persistence is found to be very high, but heterogeneity in this persistence is low.
| Original language | English |
|---|---|
| Pages (from-to) | 58-75 |
| Number of pages | 18 |
| Journal | Journal of Agricultural Economics |
| Volume | 69 |
| Issue number | 1 |
| Early online date | 25 Sept 2017 |
| DOIs | |
| Publication status | Published - Feb 2018 |
Keywords
- Dairy farms
- dynamic stochastic frontier
- heterogeneity
- inefficiency persistence
- long-run technical efficiency
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics and Econometrics