Estimating A Profit Function In The Presence Of Inefficiency: An Application To Russian Agriculture
The relationship among cost functions, distance functions, and technical inefficiency are utilized to show how technical inefficiency scores can be incorporated into the specification of a profit function and a related system of output supply and input demands. A method also is introduced for incorporating allocative efficiency scores into the same system. The theoretical and empirical approach requires fewer assumptions than those made in many studies. An illustrative example is provided for Russian agriculture for 1194-95, a period when significant technical and allocative inefficiency was known to exist. The results demonstrate inefficiency limits the supply response to prices, thus leading to lower estimates of output response compare to a traditional supply model in which efficiency is assumed.
Volume (Year): 27 (2002)
Issue (Month): 01 (July)
|Contact details of provider:|| Web page: http://waeaonline.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonasson, Lars & Apland, Jeffrey, 1997. "Frontier Technology and Inefficiencies in Programming Sector Models: An Application to Swedish Agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 24(1), pages 109-131.
- J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
- Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, vol. 7(3-4), pages 185-208, October.
- Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, October.
- Subal C. Kumbhakar, 2001. "Estimation of Profit Functions When Profit Is Not Maximum," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 1-19.
- Sedik, David & Trueblood, Michael & Arnade, Carlos, 1999. "Corporate Farm Performance in Russia, 1991-1995: An Efficiency Analysis," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 514-533, September.
- Sotnikov, Sergey, 1998. "Evaluating the Effects of Price and Trade Liberalisation on the Technical Efficiency of Agricultural Production in a Transition Economy: The Case of Russia," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(3), pages 412-431.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Davidson, Russell & MacKinnon, James G., 1983. "Testing the specification of multivariate models in the presence of alternative hypotheses," Journal of Econometrics, Elsevier, vol. 23(3), pages 301-313, December.
- Carlos Arnade & Munisamy Gopinath, 2000. "Financial constraints and output targets in Russian agricultural production," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(1), pages 71-84.