Dynamic Efficiency Analysis using a Directional Distance Function

Input-based dynamic efficiency measures are derived from an adjustment-cost directional distance function approach. A dynamic input directional distance function can be generated from an adjustment-cost technology where the dynamics are explicitly incorporated in the form of the properties of the input requirement sets with respect to the quasi-fixed factors. The properties of the dynamic input directional distance function are inherited from the properties of the technology. The efficiency measures are then applied to a panel data set of Dutch horticulture firms over the period 1991-1995.Productivity Analysis,

Learning in Organic Farming An Application on Finnish Dairy Farms

Organic farming technology may be relatively unknown to farmers at the time when they switch from conventional into organic farming. Therefore, experience gained over time and learning by doing may be important determinants in the efficiency of organic farming. It may also take time to reach the optimal nutrient stock of soil and optimal nutrient supply for arable crops under organic farming. Thus, efficiency of organic farming can either grow or decrease over time depending on the nature of the technology and the learning process. This paper estimates technical efficiency of organic farming and its development over time. We control for possible selection bias and regional heterogeneity when estimating a stochastic frontier distance functions for a sample of conventional and organic dairy farms in Finland. The results suggest that organic dairy farms are less technically efficient than conventional farms. Technical efficiency at first diminishes when the conversion towards organic production starts. After 6 years from the switch, technical efficiency starts to increase again. The estimates signal that the length of the conversion and learning process of organic farming is in average 6-7 years.technical efficiency, technical change, output distance function, SFA, Research and Development/Tech Change/Emerging Technologies, C23, D24, D83, O30, Q12,

Semi-Parametric Modeling of Investments in Energy Installations

This paper applies a semi-parametric approach to estimating a generalised model of investments in energy installations. The model accounts for irreversibility and lumpiness of investments by linking a parametric specification of the unobservable dynamic shadow price to observed investment behaviour using a non-parametric specification of the adjustment cost function. The results suggest that marginal costs of investments in energy installations increase quickly at small investment levels, whereas the increase slows down at higher investment levels. Therefore, standard parametric adjustment cost models are likely biased such that they over-estimate small investments and under-estimate large investments.Investments, horticulture, semi-parametric estimation, Resource /Energy Economics and Policy,

LIQUIDITY AND PRODUCTIVITY IN RUSSIAN AGRICULTURE: FARM-DATA EVIDENCE

The Russian agricultural sector has experienced many problems since the beginning of the 1990s that resulted in a fall in farm output. Employing a production function approach and, unlike other studies, farm-level data on more than 20,000 Russian large-scale farms for the period 1995-2000, this study analyzes the impact of both production (land, labour, capital, materials) and financial (debts and budget transfers) determinants on the productivity. Inter-regional differences such as weather conditions and farm-specific features such as geographical location, management and soil quality are taken into account employing the fixed-effect estimation. The findings show that Russian farms operate under liquidity constraints that lower their productivity.Productivity Analysis,

Animals’ Health Control Efficiency in Northwest Portugal: A Two-stage DEA Approach

A two-stage approach is employed to analyze the efficiency of cooperatives responsible for ruminants’ disease control (OPP) at the farm level in Northwest Portugal. In the first stage, Data Envelopment Analysis (DEA) is used to estimate and decompose input-based overall inefficiency for each OPP. The input-based inefficiency measures are generated using the directional input distance function. In the second stage, the inefficiency estimates are regressed on environmental and organizational factors in order to explain efficiency differentials. Despite substantial environmental differences, the empirical results indicate that most cooperatives can reduce costs by improving scale efficiency and pure technical efficiency.input directional distance function, bootstrapping, economic efficiency, animal health services., Agricultural and Food Policy,

Farmers' Exit Decisions and Early Retirement Programs in Finland

This paper estimates farmer decisions between three discrete occupational choices: exit and close down the farming operation (1), exit and transfer the farm to a new entrant (2), or continue farming and retain the option to exit later on (3). The farmer optimisation problem is formulated as a recursive optimal stopping problem. The unknown parameters are first estimated by a switching-type, reduced form Probit models and, then by the Simulated maximum likelihood (SML) method, controlling for serial correlation in the errors. Serial correlation in the errors is controlled for by the Geweke-Hajivassiliou-Keane (GHK) simulation technique. The results suggest that the timing and the type of farmer exit decisions respond elastically to farmer characteristics, farm characteristics, and economic environment. Early retirement programs and the level of farmer retirement benefits are predicted to play a key role in steering structural development and enhancing family farms in the Nordic agricultural sectors.exit, entry, dynamic programming, switching-type Probit, Simulated Maximum Likelihood, Labor and Human Capital,

Dynamic Decomposition of Total Factor Productivity Change in the EU Food, Beverages, and Tobacco Industry: The Effect of R&D

The main objective of this paper is to generate measures of TFP change for the food, beverages, and tobacco industry in the EU. Explicitly taking into account the fact that some of the inputs used in the industry are fixed in the short run, the generated measures of TFP change reflects the dynamic nature of the problem. The second objective is to analyse TFP change into its components and explicitly examine the effect of Research and Development (R&D) effort on TFP growth. Data are collected from EU KLEMS and the OECD Structural Analysis database. The data contain country-level information on output volume, input prices and capital stock, as well as R&D expenditure for the food, beverages, and tobacco industry for the 15 “old” EU Member States. They cover the 1970-2005 but most series contain gaps. The results show that for the period under consideration TFP in the industry grew on average at an annual rate of almost 2%. TFP growth was much faster in the 1970s and 1980s, with a considerable slowdown in the 1990s. This growth is driven primarily by growth in output and secondly by the reduction in labour input. Expenditure on R&D has a positive but relatively small effect on TFP.TFP change, Food Industry, R&D., Agricultural and Food Policy,

Efficiency of Investor Owned Firms and Cooperatives Revisited

Providing a performance measure of any firm is a crucial issue, not only for the stakeholders of the firm, but also for policy makers, labor unions, and economists. The relevant performance measures should consider the objectives of the firm’s owners. The ownership structure of cooperatives is different from that of investors owned firms, which in principle implies the need of different tools to measure their performance. Typically, however, the performance of cooperatives and investor owned firm is mostly compared using the same approach. In this study, we use Data Envelopment Analysis (DEA) to compare the performance of dairy cooperatives and investor owned firms in major European dairy producing countries using a traditional approach, which views both types of firms as cost minimizers, and an alternative approach, which considers the objectives of the cooperatives. In the alternatives approach, two hyperbolic models were evaluated, one of them consider the firms to expand both output production and use of material to address the objective of the owners of the cooperatives. The performance of the cooperatives changes across the two approaches form being out performed by IOFs using the traditional approach to outperforming IOFs when using an approach that is in line with the objective of the cooperative.DEA, hyperbolic efficiency, cooperatives, Investor Owned Firms, Bootstrapping, Agricultural and Food Policy,

Competitiveness of dairy farms in three countries: the role of CAP subsidies

This paper investigates the impact of CAP subsidies on the competitiveness of dairy farms in Germany, the Netherlands, and Sweden. Technical efficiency results show that coupled subsidies have negative impacts in Germany and the Netherlands, but no significant impacts in Sweden. Decoupled subsidies negatively affect technical efficiency in each country and to a larger extent than coupled subsidies. Relative productivity results indicate that Dutch technology leads to the highest output, followed by technologies in Germany and Sweden. Dutch farms can improve their competitiveness by exploring their current production potential. Besides improving efficiency, German and Swedish farms may have options to improve their production technology.technical efficiency, output distance function, dairy farm, subsidy, relative productivity, Agricultural and Food Policy, Livestock Production/Industries,

A dynamic dual model under state-contingent production uncertainty

In this paper we assess how production costs and capital accumulation patterns in agriculture have evolved over time, by paying special attention to the influence of risk. A dynamic state-contingent cost minimization approach is applied to assess production decisions in US agriculture over the last century. Results suggest the relevance of allowing for the stochastic nature of the production function which permits to capture both the differences in the costs of producing under different states of nature, the differences in the evolution of these costs over time, as well as the differential impacts of different states of nature on investment decisions.risk, state-contingent, dynamic model, investment decisions, Agricultural and Food Policy, Farm Management, Land Economics/Use, D21,