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Contributions Of Productivity And Relative Price Changes To Farm Level Profitability Change

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  • Mugera, Amin W.
  • Langemeier, Michael R.

Abstract

This article investigates the sources of profitability and productivity change at the farm level with an application to a group of 252 farms in Kansas over an 18 years period, from 1993 to 2010. The Lowe index method is used to compute changes in total factor productivity (TFP) and terms of trade (TT). Nonparametric data envelopment analysis is used to decompose TFP into technical change and different measures of output oriented efficiency change. Profitability change is mainly driven by TFP change. The main source of TFP change is technical progress. The upward shifting efficiency frontier results in declining technical efficiency. Both profitability and productivity vary by farm size and specialization. Results point for the need to support research and development without ignoring efforts to encourage uptake of existing technologies.

Suggested Citation

  • Mugera, Amin W. & Langemeier, Michael R., 2013. "Contributions Of Productivity And Relative Price Changes To Farm Level Profitability Change," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150639, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:150639
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    File URL: http://purl.umn.edu/150639
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    References listed on IDEAS

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    1. QI Li & Desheng Ouyang & Jeffrey S. Racine, 2013. "Categorical semiparametric varying‐coefficient models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 551-579, June.
    2. Yeager, Elizabeth A. & Langemeier, Michael R., 2011. "Productivity Divergence across Kansas Farms," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), August.
    3. Mugera, Amin W. & Langemeier, Michael R., 2011. "Does Farm Size and Specialization Matter for Productive Efficiency? Results from Kansas," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(04), pages 515-528, November.
    4. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    5. Amin Mugera & Michael Langemeier & Allen Featherstone, 2012. "Labor productivity convergence in the Kansas farm sector: a three-stage procedure using data envelopment analysis and semiparametric regression analysis," Journal of Productivity Analysis, Springer, vol. 38(1), pages 63-79, August.
    6. Mugera, Amin W. & Langemeier, Michael R. & Featherstone, Allen M., 2012. "Labor Productivity Growth in the Kansas Farm Sector: A Tripartite Decomposition Using a Non-Parametric Approach," Agricultural and Resource Economics Review, Cambridge University Press, vol. 41(03), pages 298-312, December.
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    Keywords

    Agricultural Finance; Production Economics; Productivity Analysis;

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