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Dynamic Profit Inefficiency: A DEA Application to Belgian Dairy Farms

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  • Ang, Frederic
  • Oude Lansink, Alfons

Abstract

Using a nonparametric framework, we analyze dynamic profit inefficiency for a sample of Belgian, specialized dairy farms from 1996–2008. Profit inefficiency is decomposed into contributions of output, input, and investment. Moreover, we identify the contributions of technical and allocative inefficiency in each input and output. The results suggest substantial profit inefficiency under the current dairy-quota system, mainly driven by an average underproduction of approximately 50 percent and an average underuse of variable inputs of approximately 60 percent, due to allocative inefficiency. Consequently, abolishing the dairy-quota system in 2015 may considerably increase demand for variable inputs and supply of output.

Suggested Citation

  • Ang, Frederic & Oude Lansink, Alfons, 2014. "Dynamic Profit Inefficiency: A DEA Application to Belgian Dairy Farms," Working Papers 165693, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    • Handle: RePEc:ags:kucawp:165693
    DOI: 10.22004/ag.econ.165693
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    Cited by:

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    2. Levi, Loic & Chavas, Jean-Paul, 2018. "How Does Eliminating Quotas Affect Firm Investment? Evidence from Dairy Farms," 2018 Annual Meeting, August 5-7, Washington, D.C. 273831, Agricultural and Applied Economics Association.
    3. Loic Levi & Obafemi Philippe Koutchade & Laure Latruffe & Aude Ridier, 2018. "Spatial effects in investment decisions: Evidence from French dairy farms," Post-Print hal-02024077, HAL.

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