A reduced-form model for dynamic efficiency measurement: Application to Dairy Farms from Germany and The Netherlands

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Abstract

The stochastic distance function model is extended to allow for the inefficiency component of the error term to be autocorrelated, as implied by a dynamic model of firm behavior. The autocorrelation parameter can then be interpreted as a measure of the persistence of inefficiency. The model is viewed from a state-space perspective, and Kalman filtering techniques are proposed for estimation. The model is applied to two panels of dairy farms from Germany and the Netherlands. The results suggest a very high degree of persistence of inefficiency through time.
Original languageEnglish
Pages (from-to)161-174
JournalAmerican Journal of Agricultural Economics
Volume93
DOIs
Publication statusPublished - 2011

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Keywords

  • distance function-approach
  • data envelopment analysis
  • production frontiers
  • panel-data
  • inefficiency
  • integration
  • growth
  • firm

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