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An Investigation of the Technical and Allocative Efficiency of Broadacre Farmers

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  • Henderson, Benjamin B.
  • Kingwell, Ross S.

Abstract

The technical and allocative efficiency of broadacre farmers in a southern region of Western Australia is investigated over a three-year period. Applying data envelopment analysis (DEA) and stochastic frontier analysis (SFA) reveals there is some inefficiency in each year, which decreases over time. The distributions of technical efficiency in each year are positively skewed toward higher efficiency levels, indicating a majority of farms produce close to their maximum technical efficiency. DEA and SFA produce similar efficiency rankings of farms yet DEA rankings are more stable. The relationships between farm-specific variables and the DEA and SFA efficiency scores are investigated. There is evidence that farmers benefit from using at least a small amount of tillage, rather than using ‘no-till’ practices. Education levels and farmer age are found to positively influence technical efficiency. Using a DEA profit efficiency model, the duality between the directional distance function and the profit function allows the decomposition of economic efficiency into its technical and allocative components. Greater gains in profitability are possible by improving allocative rather than technical efficiency. Technically efficient farms are not necessarily allocatively efficient. Also, Tobit regression results indicate that the variables associated with variation in technical efficiency are different to those explaining the variation in allocative efficiency.

Suggested Citation

  • Henderson, Benjamin B. & Kingwell, Ross S., 2001. "An Investigation of the Technical and Allocative Efficiency of Broadacre Farmers," 2002 Conference (46th), February 13-15, 2002, Canberra 125109, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare02:125109
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    References listed on IDEAS

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    1. Loren Tauer, 1995. "Age and Farmer Productivity," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 17(1), pages 63-69.
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    9. Kalaitzandonakes, N.G. & Dunn, E.G., 1995. "Technical Efficiency, Managerial Ability and Farmer Education in Guatemalan Corn Production: A Latent Variable Analysis," Agricultural and Resource Economics Review, Cambridge University Press, vol. 24(01), pages 36-46, April.
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