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Estimating the Technical Optimal Scale of Production in Danish Agriculture

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  • Rasmussen, Svend

Abstract

This paper uses representative farm account data for 1985-2007 to estimate stochastic production frontiers in the form of input distance functions for Danish crop, dairy and pig farms. The objective is to study and compare scale economies for the three farm types. The estimated technical efficiency is relatively constant over time for all three farm types, but the elasticity of scale differs. Although the size of all farm types has increased considerably during the last 20 years, more than 95 % of the crop farms and 85 % of the dairy and pig farms are still below the estimated technical optimal scale of production. The results support the hypothesis that the restrictions concerning the amalgamation of farms and the purchase of farm land have seriously prevented Danish farmers, and especially cash crop farmers, from taking full advantage of scale economies.

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File URL: http://purl.umn.edu/114790
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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114790.

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Date of creation: 2011
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Handle: RePEc:ags:eaae11:114790

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Keywords: Scale economies; agriculture; SPF; input distance function; technical optimal scale; elasticity of scale; Farm Management;

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  1. Beugelsdijk,Sjoerd & Maseland,Robbert, 2010. "Culture in Economics," Cambridge Books, Cambridge University Press, number 9780521193009, October.
  2. Chavas, Jean-Paul, 2001. "Structural change in agricultural production: Economics, technology and policy," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 5, pages 263-285 Elsevier.
  3. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
  4. George E. Battese, 1997. "A Note On The Estimation Of Cobb-Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 250-252.
  5. Bert Balk, 2001. "Scale Efficiency and Productivity Change," Journal of Productivity Analysis, Springer, vol. 15(3), pages 159-183, May.
  6. Roberto Mosheim & C.A. Knox Lovell, 2007. "Scale Economies and Inefficiency of U.S. Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 777-794.
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Cited by:
  1. Mikkel Bojesen & Hans Skov-Petersen & Morten Gylling, 2013. "Forecasting the potential of Danish biogas production: spatial representation of Markov chains," IFRO Working Paper 2013/16, University of Copenhagen, Department of Food and Resource Economics.

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