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Aggregate Technical Efficiency and Water Use in U.S. Agriculture

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  • Zaeske, Andrew

    (CERE, Centre for Environmental and Resource Economics)

Abstract

In the United States freshwater withdrawals for agriculture account for 80% of all out of stream water withdrawals from 1985 to 2005. To assess what drives water use in agriculture, we use the two error stochastic frontier analysis model of Battese and Coelli (1995) to estimate a translog production frontier for agriculture at the state level. The inclusion of non-negative technical inefficiency eff ects allows us to account for additional characteristics in our assessment of production inefficiency. The average marginal value of irrigation is $380, while we fi nd that on average $1 of intermediate inputs provides $0.96 of final output. These results are driven by a small subset of states with large negative values, indicating persistent misallocation of resources. The inefficiency eff ects regression finds that government subsidies increase in value of output of 0:083 per real dollar of subsidies and that that shifts from larger acreage farms to lower acreage ones will generally be efficiency increasing. This analysis highlights di fferences in water use and how they can have major implications for farm policy as a whole. Of particular note is the measured positive correlation between having a negative marginal product of intermediates and having a positive marginal product of irrigation, which suggests that shifts in inputs from intermediates to irrigation are a ripe target for efficiency gains in many states.

Suggested Citation

  • Zaeske, Andrew, 2012. "Aggregate Technical Efficiency and Water Use in U.S. Agriculture," CERE Working Papers 2012:11, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2012_011
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    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-11.pdf
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    References listed on IDEAS

    as
    1. Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 1999. "The Components of Output Growth: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 455-487, November.
    2. Tim Coelli & Sanzidur Rahman & Colin Thirtle, 2003. "A stochastic frontier approach to total factor productivity measurement in Bangladesh crop agriculture, 1961-92," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(3), pages 321-333.
    3. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-1248, September.
    4. Gary Koop & Jacek Osiewalski & Mark F. J. Steel, 1999. "The Components of Output Growth: A Stochastic Frontier Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 455-487, November.
    5. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    6. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    7. 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.
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    Cited by:

    1. Basurto Hernandez, Saul & Maddison, David & Banerjee, Anindya, 2018. "The effect of PROCAMPO on farms’ technical efficiency: A Stochastic Frontier Analysis," 2018 Annual Meeting, August 5-7, Washington, D.C. 274376, Agricultural and Applied Economics Association.
    2. Minviel, Jean Joseph & Latruffe, Laure, 2014. "Meta-regression analysis of the impact of agricultural subsidies on farm technical efficiency," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182767, European Association of Agricultural Economists.

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    More about this item

    Keywords

    agriculture; water use;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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