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Scale Efficiency in the New Zealand Dairy Industry: A Non-Parametric Approach


  • Mohammad Jaforullah
  • John Whiteman


The objective of this paper is to measure the scale efficiency of the New Zealand dairy industry and to examine the relationship between farm size and efficiency. Data envelopment analysis (DEA) is applied to a sample of 264 dairy farms. The results suggest that 19 per cent of these farms are operating at optimal scale, 28 per cent at above optimal scale, and 53 per cent at below optimal scale. On average the optimal size for New Zealand dairy farms is estimated at 83 hectares with a herd of 260 animals. Average technical efficiency is estimated at 89 per cent.

Suggested Citation

  • Mohammad Jaforullah & John Whiteman, 1998. "Scale Efficiency in the New Zealand Dairy Industry: A Non-Parametric Approach," Centre of Policy Studies/IMPACT Centre Working Papers g-129, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-129

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    References listed on IDEAS

    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    2. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    3. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-287, May.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    5. Kaludura Abayasiri-Silva & Mark Horridge, 1996. "Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy," Centre of Policy Studies/IMPACT Centre Working Papers op-84, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Hertel, Thomas & Lanclos, D. Kent & Thursby, Marie, 1991. "General Equilibrium Effects of Trade Liberalization in the Presence of Imperfect Competition," 1991 Conference, August 22-29, 1991, Tokyo, Japan 183247, International Association of Agricultural Economists.
    7. Randall Wigle, 1988. "General Equilibrium Evaluation of Canada-U.S. Trade Liberalization in a Global Context," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 539-564, August.
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    Cited by:

    1. Fraser, I. & Cordina, D., 1999. "An application of data envelopment analysis to irrigated dairy farms in Northern Victoria, Australia," Agricultural Systems, Elsevier, vol. 59(3), pages 267-282, March.

    More about this item


    Data envelopment analysis (DEA); benchmarking partnerships; technical efficiency; optimal; supra-optimal and sub-optimal scale;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity


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