Journal Article

A Reduced-Form Model for Dynamic Efficiency Measurement: Application to Dairy Farms in Germany and The Netherlands

Grigorios Emvalomatis, Spiro E. Stefanou and Alfons Oude Lansink

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 93, issue 1, pages 161-174
Published in print January 2011 | ISSN: 0002-9092
Published online January 2011 | e-ISSN: 1467-8276 | DOI: https://dx.doi.org/10.1093/ajae/aaq125
A Reduced-Form Model for Dynamic Efficiency Measurement: Application to Dairy Farms in Germany and The Netherlands

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  • Production and Organizations
  • Single Equation Models; Single Variables
  • Agricultural Economics

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The stochastic distance function model is extended to allow for the inefficiency component of the error term to be autocorrelated, as implied by a dynamic model of firm behavior. The autocorrelation parameter can then be interpreted as a measure of the persistence of inefficiency. The model is viewed from a state-space perspective, and Kalman filtering techniques are proposed for estimation. The model is applied to two panels of dairy farms from Germany and the Netherlands. The results suggest a very high degree of persistence of inefficiency through time.

Keywords: distance function; autocorrelated inefficiency; dairy farming; C23; D22; D24; Q12

Journal Article.  7065 words.  Illustrated.

Subjects: Production and Organizations ; Single Equation Models; Single Variables ; Agricultural Economics

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