Measuring Dynamic Efficiency under Uncertainty: An Application to German Dairy Farms
AbstractThe existing literature on dynamic efficiency is deterministic and ignores uncertainty when deriving dynamic efficiency measures, even though it is known that uncertainty affects the optimal adjustment path and the optimal use of quasi-fixed factors. Here, we contribute to closing this gap by developing a model that takes the dynamic efficiency measurement and the optimal investment under uncertainty jointly into consideration. We apply this model to German farm-level panel data to investigate whether West German dairy farms use their variable and quasi-fixed factors in a technically and allocative efficient way in the long run, and to explore the role of uncertainty within the optimal factor allocation process. We find empirical evidence for the importance of considering uncertainty when deriving (dynamic) efficiency measures: neglecting uncertainty within the estimation procedure will overestimate the average inefficiency score. This is not only interesting from an academic point of view; it has further implications for the analysis of the relative performance of specific farm types like cash crop or other livestock farms.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149632.
Date of creation: 2013
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Efficiency; shadow cost approach; uncertainty; dairy sector; Farm Management; Production Economics; Productivity Analysis; Risk and Uncertainty; D61; D81; Q12;
Find related papers by JEL classification:
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-06-24 (Agricultural Economics)
- NEP-ALL-2013-06-24 (All new papers)
- NEP-EFF-2013-06-24 (Efficiency & Productivity)
- NEP-EUR-2013-06-24 (Microeconomic European Issues)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grigorios Emvalomatis & Spiro E. Stefanou & Alfons Oude Lansink, 2010. "A Reduced-Form Model for Dynamic Efficiency Measurement: Application to Dairy Farms in Germany and The Netherlands," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 161-174.
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