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A Comparison of Stochastic Frontier Approaches to Estimating Inefficiency and Total Factor Productivity: An Application to Irish Dairy Farming

Author

Listed:
  • James Carroll

    () (Department of Economics, Trinity College Dublin)

  • Carol Newman

    () (Department of Economics, Trinity College Dublin)

  • Fiona Thorne

    () (Rural Economy Research Centre, Teagasc, Dublin, Ireland)

Abstract

This paper compares standard stochastic frontier models for panel data with a number of recently developed models designed to remove unobserved heterogeneity from the inefficiency component. Results are used to construct a generalised Malmquist total factor productivity (TFP) index. We conclude that the choice of approach makes little difference where the purpose of the study is to analyse aggregate trends in TFP and its components. However, where inefficiency estimates and their dispersion are of interest, attention should be paid to how the analyst's interpretation of inefficiency relates to the underlying assumptions of the model that is used.

Suggested Citation

  • James Carroll & Carol Newman & Fiona Thorne, 2007. "A Comparison of Stochastic Frontier Approaches to Estimating Inefficiency and Total Factor Productivity: An Application to Irish Dairy Farming," Trinity Economics Papers tep0907, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:tep0907
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    File URL: http://www.tcd.ie/Economics/TEP/2007/TEP0907.pdf
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    Cited by:

    1. Cathal O'Donoghue & Thia Hennessy, 2014. "Chapter 03: The Agri-Food Sector," Chapters from Rural Economic Development in Ireland,in: Rural Economic Development in Ireland, edition 1, chapter 3 Rural Economy and Development Programme,Teagasc.
    2. A. Tonini, 2012. "A Bayesian stochastic frontier: an application to agricultural productivity growth in European countries," Economic Change and Restructuring, Springer, vol. 45(4), pages 247-269, November.
    3. Cathal O'Donoghue & Thia Hennessy, 2015. "Policy and Economic Change in the Agri-Food Sector in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 46(2), pages 315-337.
    4. A. Wondemu Kifle, 2016. "Working Paper 237 - Decomposing Sources of Productivity Change in Small-Scale Farming in Ethiopia," Working Paper Series 2332, African Development Bank.
    5. Kazukauskas, Andrius & Newman, Carol F. & Thorne, Fiona S., 2010. "Analysing the Effect of Decoupling on Agricultural Production: Evidence from Irish Dairy Farms using the Olley and Pakes Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
    6. Asif Reza Anik & Sanzidur Rahman & Jaba Rani Sarker, 2017. "Agricultural Productivity Growth and the Role of Capital in South Asia (1980–2013)," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-24, March.

    More about this item

    Keywords

    Efficiency; panel data; total factor productivity; stochastic production frontier; ‘true' effects models; dairy sector;

    JEL classification:

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