On the Anatomy of Productivity Growth: A Decomposition of the Fisher Ideal TFP Index

Decompositions of productivity indices contribute to our understanding of what drives the observed productivity changes by providing a detailed picture of their constituents. This paper presents the most comprehensive decomposition of total factor productivity (TFP) to date. Starting from the Fisher ideal TFP index, we systematically isolate the productivity effects of changes in production technology, technical efficiency, scale efficiency, allocative efficiency, and the market strength. The three efficiency components further decompose into input- and output-side effects. The proposed decomposition is illustrated with an empirical application to a sample of 459 Finnish farms over period 1992-2000.index numbers and aggregation, Total Factor Productivity (TFP) measurement, Fisher ideal index, Malmquist index, decompositions, agriculture

Onko tavanomainen maidontuotanto luonnonmukaista tehokkaampaa?

Tavanomainen maidontuotanto on teknisesti tehokkaampaa eli se on tuottavampaa kuin luomutuotanto, kun tarkastellaan pelkästään perinteisiä tuotoksia ja panoksia. Luomutilojen tehokkuus riippuu kuitenkin siitä, kuinka pitkään luomutuotantoa on harjoitettu. Tekninen kehitys on ollut luomutiloilla vähintään yhtä nopeaa kuin tavanomaisilla tiloilla.vo

Do the opportunity costs of providing crop diversity differ between organic and conventional farms? The case of Finnish agriculture

The attractiveness of targeted environmental policies on farmlands depends crucially on the opportunity costs of the conservation programs. We use a crop diversity index as an indicator of environmental output to compare the efficiency of conventional and organic crop farms. Technical efficiency scores are estimated by applying data envelopment analysis to a sample of Finnish farms for the period 1994 – 2002. We also estimate shadow values, or the opportunity costs, of producing crop diversity. Our results show that there is variation in the shadow values between farms and the technology adopted. The findings provide a basis for designing cost-effective policy instruments such as auctions for conservation payments

The Law of One Price in Data Envelopment Analysis: Restricting Weight Flexibility Across Firms

The Law of One Price (LoOP) states that all firms face the same prices for their inputs and outputs in the competitive market equilibrium. This law has powerful implications for productive efficiency analysis, which have remained unexploited thus far. This paper shows how LoOP-based weight restrictions can be incorporated in Data Envelopment Analysis (DEA). Utilizing the relation between the industry level and the firm level cost efficiency measures, we propose to apply a set of input prices that is common for all firms and that maximizes cost efficiency of the industry. Our framework allows for firm-specific output weights and variable returns-to-scale, and preserves the linear programming structure of the standard DEA. We apply the proposed methodology for evaluating research efficiency of economics departments of Dutch Universities. This application shows that the methodology is computationally tractable for practical efficiency analysis, and that it helps in deepening the DEA analysis.Data Envelopment Analysis; Law of One Price; industry-level efficiency; weight restrictions; research efficiency

Firm and Industry Level Profit Efficiency Analysis Under Incomplete Price Data: A Nonparametric Approach based on Absolute and Uniform Shadow Prices

We discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information, and propose two new insights. First, choosing one commodity (whose price is known) as a numeraire good enables us to measure profit inefficiency in absolute monetary terms. Second, imposing a ‘Law of One Price’ (LoOP) constraint that all firms should be evaluated in terms of the same input-output prices allows us to aggregate firm-level profit inefficiencies to the overall industry inefficiency. Moreover, the LoOP restrictions increase the discriminatory power of the method by better capturing firm-level allocative inefficiencies. Besides the measurement of profit losses, the presented approach enables one to recover absolute price information from quantity data. We conduct a series of Monte Carlo simulations to study the performance of the proposed approach in controlled production environments.Profit Efficiency, Industry Inefficiency, Data Envelopment Analysis, Absolute Prices, Law of One Price, Weight Restrictions, Simulation

Maitotilojen suorituskyky vuosina 1989 - 2000

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A dynamic stochastic frontier approach with persistent and transient inefficiency and unobserved heterogeneity

This article introduces a dynamic stochastic frontier analysis (SFA) framework with unobserved heterogeneity, persistent and transient inefficiency effects, based on recent advances in the SFA literature. The newly developed dynamic frontier model is applied on a sample of French crop-livestock farms. The estimates provide useful insights for the estimation of the technical efficiency scores as well as for the analysis of the associations of contextual drivers, such as public subsidies and indebtedness, with technical efficiency.Peer reviewe