A Comparison of Stochastic Frontier Approaches to Estimating Inefficiency and Total Factor Productivity: An Application to Irish Dairy Farming
AbstractThis paper compares standard stochastic frontier models for panel data with a number of recently developed models designed to remove unobserved heterogeneity from the inefficiency component. Results are used to construct a generalised Malmquist total factor productivity (TFP) index. We conclude that the choice of approach makes little difference where the purpose of the study is to analyse aggregate trends in TFP and its components. However, where inefficiency estimates and their dispersion are of interest, attention should be paid to how the analyst’s interpretation of inefficiency relates to the underlying assumptions of the model that is used.
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Bibliographic InfoPaper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number tep0907.
Length: 21 pages
Date of creation: Jun 2007
Date of revision:
Efficiency; panel data; total factor productivity; stochastic production frontier; ‘true’ effects models; dairy sector;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- 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-2007-06-18 (Agricultural Economics)
- NEP-ALL-2007-06-18 (All new papers)
- NEP-ECM-2007-06-18 (Econometrics)
- NEP-EFF-2007-06-18 (Efficiency & Productivity)
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- Kazukauskas, Andrius & Newman, Carol F. & Thorne, Fiona S., 2010. "Analysing the Effect of Decoupling on Agricultural Production: Evidence from Irish Dairy Farms using the Olley and Pakes Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
- A. Tonini, 2012. "A Bayesian stochastic frontier: an application to agricultural productivity growth in European countries," Economic Change and Restructuring, Springer, vol. 45(4), pages 247-269, November.
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