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Parametric Decomposition Of Output Growth

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Author Info
Giannis Karagiannis () (Department of Economics, University of Macedonia, Greece)
Peter Midmore (Institute of Rural Studies, The University of Wales, UK)
Vangelis Tzouvelekas () (Department of Economics, University of Crete, Greece)

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Abstract

This paper proposes a tractable approach for analyzing the sources of TFP changes (i.e., technical change, changes in technical and allocative inefficiency, and the scale effect) in a multi-output setting, while retaining the single-equation nature of the econometric procedure used to estimate the parameters of the underlying technology. The proposed approach relies on Bauer’s cost function based decomposition of TFP changes and the duality between input distance and cost functions. The empirical results are based on a sample of 121 UK livestock farms observed over the period 1983-92 and a translog input distance function. It is found that improvements in technical efficiency appear to provide greater potential for enhancing farm returns than that which may be obtained from shifting the production frontier itself. In addition, scale economies and allocative inefficiency are also important sources for TFP changes on UK livestock farms.

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Publisher Info
Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0204.

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Length: 26 pages
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Handle: RePEc:crt:wpaper:0204

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Related research
Keywords: Cost function based decomposition of TFP; input distance function; UK livestock farms;

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  1. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October. [Downloadable!] (restricted)
  2. Karagiannis, G. & Midmore, P. & Tzouvelekas, V., 1999. "Separating Technical Change From Time-Varying Technical Inefficiency In The Absence Of Distributional Assumptions," Miscellaneous Papers 11842, Agecon Search. [Downloadable!]
  3. Loren W. Tauer, 1998. "Productivity of New York Dairy Farms Measured by Nonparametric Malmquist Indices," Journal of Agricultural Economics, Blackwell Publishing, vol. 49(2), pages 234-249. [Downloadable!] (restricted)
  4. Kumbhakar, Subal C & Hjalmarsson, Lennart, 1995. " Decomposing Technical Change with Panel Data: An Application to the Public Sector," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(2), pages 309-23, June.
  5. Breusch, T S & Pagan, A R, 1980. "The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 239-53, January. [Downloadable!] (restricted)
  6. Kumbhakar, Subal C. & Heshmati, Almas & Hjalmarsson, Lennart, 1997. "Temporal patterns of technical efficiency: Results from competing models," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 597-616, August. [Downloadable!] (restricted)
  7. Fare, Rolf & Grosskopf, Shawna, 1990. "A distance function approach to price efficiency," Journal of Public Economics, Elsevier, vol. 43(1), pages 123-126, October. [Downloadable!] (restricted)
  8. Coelli, Tim & Perelman, Sergio, 1999. "A comparison of parametric and non-parametric distance functions: With application to European railways," European Journal of Operational Research, Elsevier, vol. 117(2), pages 326-339, September. [Downloadable!] (restricted)
  9. Subal Kumbhakar & M. Denny & M. Fuss, 2000. "Estimation and decomposition of productivity change when production is not efficient: a paneldata approach," Econometric Reviews, Taylor and Francis Journals, vol. 19(4), pages 312-320. [Downloadable!] (restricted)
  10. Grosskopf, S. & Hayes, K. & Hirschberg, J., 1995. "Fiscal stress and the production of public safety: A distance function approach," Journal of Public Economics, Elsevier, vol. 57(2), pages 277-296, June. [Downloadable!] (restricted)
  11. Giannis Karagiannis & Vangelis Tzouvelekas, . "Self-Dual Stochastic Production Frontiers and Decomposition of Output Growth: The Case of Olive Growing Farms in Greece," Working Papers 9913, University of Crete, Department of Economics.
    Other versions:
  12. Giannakas, Konstantinos & Tran, Kien C & Tzouvelekas, Vangelis, 2000. "Efficiency, Technological Change and Output Growth in Greek Olive Growing Farms: A Box-Cox Approach," Applied Economics, Taylor and Francis Journals, vol. 32(7), pages 909-16, June. [Downloadable!] (restricted)
  13. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May. [Downloadable!] (restricted)
  14. Shawna Grosskopf & Kathy J. Hayes & Lori L. Taylor & William L. Weber, 1997. "Budget-Constrained Frontier Measures Of Fiscal Equality And Efficiency In Schooling," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 116-124, February. [Downloadable!] (restricted)
  15. Paul W. Bauer, 1988. "Decomposing TFP growth in the presence of cost inefficiency, nonconstant returns to scale, and technological progress," Working Paper 8813, Federal Reserve Bank of Cleveland. [Downloadable!]
  16. Schmidt, Peter & Lovell, C. A. Knox, 1980. "Estimating stochastic production and cost frontiers when technical and allocative inefficiency are correlated," Journal of Econometrics, Elsevier, vol. 13(1), pages 83-100, May. [Downloadable!] (restricted)
  17. Kopp, Raymond J, 1981. "The Measurement of Productive Efficiency: A Reconsideration," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 477-503, August. [Downloadable!] (restricted)
  18. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200. [Downloadable!] (restricted)
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  19. Baltagi, Badi H & Griffin, James M, 1988. "A General Index of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 20-41, February. [Downloadable!] (restricted)
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