Economic, environmental, and social inefficiency assessment of Dutch dairy farms based on the dynamic by-production model

The growth of milk production in the Netherlands which followed the abolition of the milk quota in 2015, put pressure on the sustainable development of dairy farms. In this paper, we use the by-production model to measure dynamic economic, environmental, and social inefficiency of Dutch dairy farms. Subsequently, we investigate associations between inefficiency and socio-economic factors using a bootstrap truncated regression model. We find farms to perform more poorly in the environmental dimension than in the economic and social dimensions. The share of household labor in total labor, farm size, replacement rate of dairy cows, specialization and government support are associated with a higher environmental inefficiency. Intensity of advisory services and number of entrepreneurs are associated with a lower environmental inefficiency. Age of the oldest entrepreneur, intensity of advisory services and share of household labor in total labor are all associated with a higher economic inefficiency and farm size is associated with a lower economic inefficiency. Social inefficiency is negatively associated with financial structure, specialization, and government support. The results provide insights into potential pathways towards improving the economic, environmental, and social performance.