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Scale Economies and Efficiency in U.S. Agriculture: Are Traditional Farms History?

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  • Catherine Paul
  • Richard Nehring
  • David Banker
  • Agapi Somwaru
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    Abstract

    The structural transformation of agriculture in recent decades has raised serious concerns about the future of the family farm. This study examines the economic performance of U.S. farms, to explore the potential of smaller farms to compete with larger entities, and ultimately to survive in this rapidly changing environment. We use deterministic and stochastic frontier methods and survey data to measure and evaluate factors underlying scale economies (SEC) and efficiency (SEF) of corn-belt farms for 1996–2001. Our results suggest that family farms are both scale and technically inefficient. Potential for the exploitation of significant scale and scope economies, and some greater technical efficiency, seem to be driving trends toward increased farm size and dwindling competitiveness of the small family farm. Copyright Kluwer Academic Publishers 2004

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Productivity Analysis.

    Volume (Year): 22 (2004)
    Issue (Month): 3 (November)
    Pages: 185-205

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    Handle: RePEc:kap:jproda:v:22:y:2004:i:3:p:185-205

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    Web page: http://www.springerlink.com/link.asp?id=100296

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    1. C. Lovell, 2003. "The Decomposition of Malmquist Productivity Indexes," Journal of Productivity Analysis, Springer, vol. 20(3), pages 437-458, November.
    2. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    3. Subhash Ray, 2003. "Measuring Scale Efficiency from the Translog Multi-Input, Multi-Output Distance Function," Working papers 2003-25, University of Connecticut, Department of Economics.
    4. Almas Heshmati & Subal C. Kumbhakar, 1997. "Estimation Of Technical Efficiency In Swedish Crop Farms: A Pseudo Panel Data Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 22-37.
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    6. Shon P. Williams & C. Richard Shumway, 1998. "Testing for Behavioral Objective and Aggregation Opportunities in U.S. Agricultural Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 195-207.
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    8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    9. Fare, Rolf & Grosskopf, Shawna, 1990. "A distance function approach to price efficiency," Journal of Public Economics, Elsevier, vol. 43(1), pages 123-126, October.
    10. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    11. Kumbhakar, Subal C & Biswas, Basudeb & Bailey, DeeVon, 1989. "A Study of Economic Efficiency of Utah Dairy Farmers: A System Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 595-604, November.
    12. Sharma, Khem R. & Leung, PingSun & Zaleski, Halina M., 1999. "Technical, allocative and economic efficiencies in swine production in Hawaii: a comparison of parametric and nonparametric approaches," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 20(1), January.
    13. Sharma, Khem R. & Leung, PingSun & Zaleski, Halina M., 1999. "Technical, allocative and economic efficiencies in swine production in Hawaii: a comparison of parametric and nonparametric approaches," Agricultural Economics, Blackwell, vol. 20(1), pages 23-35, January.
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    Cited by:
    1. Harvey James, 2011. "From the editor," Agriculture and Human Values, Springer, vol. 28(3), pages 293-295, September.
    2. Imori, Denise & Guilhoto, Joaquim José Martins & Postali, Fernando Antonio Slaibe, 2012. "Production efficiency of family farms and business farms in the Brazilian regions," MPRA Paper 46995, University Library of Munich, Germany.
    3. Imori, Denise & Guilhoto, Joaquim José Martins & Postali, Fernando Antonio Slaibe, 2012. "Eficiência técnica das agropecuárias familiar e patronal – diferenças regionais no Brasil
      [Technical efficiency of agricultural households and business - regional differences in Brazil]
      ," MPRA Paper 46954, University Library of Munich, Germany.
    4. Wing Chow, Clement Kong & Fung, Michael Ka Yiu, 2009. "Efficiencies and scope economies of Chinese airports in moving passengers and cargo," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 324-329.

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