Heterogeneity of long-run technical efficiency of German dairy farms: a Bayesian approach*

TY - JOUR

T1 - Heterogeneity of long-run technical efficiency of German dairy farms

T2 - a Bayesian approach*

AU - Skevas, Ioannis

AU - Emvalomatis, Grigorios

AU - Brümmer, Bernhard

N1 - © 2017 The Agricultural Economics Society

PY - 2018/2

Y1 - 2018/2

N2 - 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.

AB - 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.

KW - Dairy farms

KW - dynamic stochastic frontier

KW - heterogeneity

KW - inefficiency persistence

KW - long-run technical efficiency

UR - https://www.scopus.com/pages/publications/85030310000

U2 - 10.1111/1477-9552.12231

DO - 10.1111/1477-9552.12231

M3 - Article

SN - 0021-857X

VL - 69

SP - 58

EP - 75

JO - Journal of Agricultural Economics

JF - Journal of Agricultural Economics

IS - 1

ER -