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Cost Efficiency and its Decomposition for Missouri Grain Farms


  • Shunxiang Wu
  • Tony Prato

    (University of Missouri)

  • Michael Kaylen

    (University of Missouri)


This study computes and decomposes farm efficiency for Missouri grain farms using a nonparametric cost frontier approach. The results indicate that the overall cost efficiency is 58 percent, suggesting significant inefficiencies exist among sample farms. Misallocation of inputs and improper scale of operation are the major sources of inefficiency. A Tobit model is used to examine the impacts of variables such as farm size, specialization, tenancy position, hired labor, and investment on inefficiency. Technical efficiency is independent of farm size, while scale efficiency is not. Improving cost efficiency, particularly allocative and scale efficiencies, would enhance farm profits.

Suggested Citation

  • Shunxiang Wu & Tony Prato & Michael Kaylen, 2005. "Cost Efficiency and its Decomposition for Missouri Grain Farms," Journal of Economic Insight (formerly the Journal of Economics (MVEA)), Missouri Valley Economic Association, vol. 31(2), pages 19-44.
  • Handle: RePEc:mve:journl:v:31:y:2005:i:2:p:19-44

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets


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