Analyzing Components of Productivity Growth Using the Bennet-Lowe Indicator: An Application to Welsh Sheep Farms

Frederic Ang*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This article introduces the Bennet-Lowe Total Factor Productivity (TFP) indicator. The proposed measure is difference-based, additively complete, and transitive. We also develop a general nonparametric framework to exhaustively decompose all Bennet-Type TFP indicators, including the one introduced here, into technical change, technical efficiency change, scale efficiency change, and mix efficiency change. This decomposition provides a powerful tool for policy makers to guide financial decisions on research and development, extension, subsidies, and price support. The empirical application focuses on the Welsh sheep sector for the years 2001-2014. The results show that in this 14-year period, Welsh sheep farms increased their TFP by 30.28% on average (2.33% p.a.). However, the exhaustive decomposition shows that TFP growth is not distributed equally across all farms, with an increasing divergence between front-runners and laggards. The negative values of scale efficiency change and mix efficiency change cast doubt on the current subsidy policies.

Original languageEnglish
Pages (from-to)1262-1276
Number of pages15
JournalAmerican Journal of Agricultural Economics
Volume101
Issue number4
DOIs
Publication statusPublished - 15 Mar 2019

Fingerprint

subsidies
Sheep
agricultural subsidies
sheep
farms
degradation
Growth
research and development
Administrative Personnel
Intercellular Signaling Peptides and Proteins
Research
Farms
Farm
Productivity growth
Efficiency change
Total factor productivity
Decomposition
Subsidies
Scale efficiency

Keywords

  • Bennet-Lowe indicator
  • data envelopment analysis
  • decomposition
  • distance function
  • total factor productivity
  • transitivity

Cite this

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title = "Analyzing Components of Productivity Growth Using the Bennet-Lowe Indicator: An Application to Welsh Sheep Farms",
abstract = "This article introduces the Bennet-Lowe Total Factor Productivity (TFP) indicator. The proposed measure is difference-based, additively complete, and transitive. We also develop a general nonparametric framework to exhaustively decompose all Bennet-Type TFP indicators, including the one introduced here, into technical change, technical efficiency change, scale efficiency change, and mix efficiency change. This decomposition provides a powerful tool for policy makers to guide financial decisions on research and development, extension, subsidies, and price support. The empirical application focuses on the Welsh sheep sector for the years 2001-2014. The results show that in this 14-year period, Welsh sheep farms increased their TFP by 30.28{\%} on average (2.33{\%} p.a.). However, the exhaustive decomposition shows that TFP growth is not distributed equally across all farms, with an increasing divergence between front-runners and laggards. The negative values of scale efficiency change and mix efficiency change cast doubt on the current subsidy policies.",
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author = "Frederic Ang",
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Analyzing Components of Productivity Growth Using the Bennet-Lowe Indicator: An Application to Welsh Sheep Farms. / Ang, Frederic.

In: American Journal of Agricultural Economics, Vol. 101, No. 4, 15.03.2019, p. 1262-1276.

Research output: Contribution to journalArticleAcademicpeer-review

TY - JOUR

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AU - Ang, Frederic

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AB - This article introduces the Bennet-Lowe Total Factor Productivity (TFP) indicator. The proposed measure is difference-based, additively complete, and transitive. We also develop a general nonparametric framework to exhaustively decompose all Bennet-Type TFP indicators, including the one introduced here, into technical change, technical efficiency change, scale efficiency change, and mix efficiency change. This decomposition provides a powerful tool for policy makers to guide financial decisions on research and development, extension, subsidies, and price support. The empirical application focuses on the Welsh sheep sector for the years 2001-2014. The results show that in this 14-year period, Welsh sheep farms increased their TFP by 30.28% on average (2.33% p.a.). However, the exhaustive decomposition shows that TFP growth is not distributed equally across all farms, with an increasing divergence between front-runners and laggards. The negative values of scale efficiency change and mix efficiency change cast doubt on the current subsidy policies.

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