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Are high labour costs destroying the competitiveness of Danish dairy farmers? Evidence from an international benchmarking analysis

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Author Info

  • Mette Asmild

    ()
    (Institute of Food and Resource Economics, University of Copenhagen)

  • Kurt Nielsen

    ()
    (Institute of Food and Resource Economics, University of Copenhagen)

  • Peter Bogetoft

    (Department of Economics, Copenhagen Business School)

Abstract

This paper analysis the competitiveness of Danish dairy farmers relative to dairy farmers in other Northern European countries. We use individual farm accounts data from the European Commission’s Farm Accountancy Data Network (FADN) and have an average of 1665 observations per year in the period from 2002 to 2008. In all years, the hourly pay for labour is highest in Denmark and the difference is increasing, especially in 2007 and 2008. We apply Data Envelopment Analysis in a new way to capture the effect on the competitiveness from these differences in labour costs. We compare the distributions of efficiency scores in different countries to assess their relative competitiveness. To analyze the effect of labour costs we apply two different DEA models; one including the labour input as hours worked and the other including labour costs. This way we capture the effect of labour costs on the differences in average efficiencies between countries. The results shows that the Danish dairy farmers, on average, were the most economically efficient in Northern Europe in 2007 and 2008. We find that the effect of labour costs for the Danish dairy farmers is decreasing during the study period despite of the salary differences increasing. In 2002 the negative impact of having the highest hourly pay was an average 4.7 percentage points whereas it in 2008 was only 0.6 percentage points.This indicates that the Danish dairy farmers have been highly successful in adapting to having the highest, and increasing, hourly labour costs in Northern Europe.

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Bibliographic Info

Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series MSAP Working Paper Series with number 01_2012.

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Length: 19 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:foi:msapwp:01_2012

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Web page: http://www.msap.life.ku.dk/
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Related research

Keywords: International benchmarking; Data Envelopment Analysis; Agriculture; FADN data;

This paper has been announced in the following NEP Reports:

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  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  2. A. Camanho & R. Dyson, 2006. "Data envelopment analysis and Malmquist indices for measuring group performance," Journal of Productivity Analysis, Springer, vol. 26(1), pages 35-49, August.
  3. Emrouznejad, Ali & Parker, Barnett R. & Tavares, Gabriel, 2008. "Evaluation of research in efficiency and productivity: A survey and analysis of the first 30 years of scholarly literature in DEA," Socio-Economic Planning Sciences, Elsevier, vol. 42(3), pages 151-157, September.
  4. Samuel Karlin, 1960. "Dynamic Inventory Policy with Varying Stochastic Demands," Management Science, INFORMS, vol. 6(3), pages 231-258, April.
  5. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
  6. Tim J. Coelli & D. S. Prasada Rao, 2005. "Total factor productivity growth in agriculture: a Malmquist index analysis of 93 countries, 1980-2000," Agricultural Economics, International Association of Agricultural Economists, vol. 32(s1), pages 115-134, 01.
  7. Peter Bogetoft & Kristoffer Boye & Henrik Neergaard-Petersen & Kurt Nielsen, 2007. "Reallocating sugar beet contracts: can sugar production survive in Denmark?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 1-20, March.
  8. Jesper Levring Andersen & Peter Bogetoft, 2007. "Gains from quota trade: theoretical models and an application to the Danish fishery," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 105-127, March.
  9. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
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