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An economic analysis of production efficiency: Evidence from Irish farms

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  • Jean‐Paul Chavas
  • Doris Läpple
  • Bradford Barham
  • Emma Dillon

Abstract

The objective of this paper is to investigate the economics of production efficiency of dairy farms, with a specific focus on the role of agricultural policy. Our analysis is based on a representative sample of Irish dairy farms, ranging from 2000 to 2018, which includes a period of major change in EU dairy policy. Based on a multi‐input multi‐output production system, we first estimate technical, allocative, scale and scope efficiencies. We find significant heterogeneity in technical and allocative efficiencies, which change over time. We also calculate shadow prices of milk quota, which suggest that milk quotas restricted many farmers and limited their ability to produce milk. Finally, we explore determinants of technical, allocative, scale and overall inefficiencies using random panel‐data censored regression. We find that subsidies are positively associated with farm efficiency, but the effects vary over distinct quota abolition periods. Overall, our empirical findings indicate that agricultural policy had important effects on the managerial effectiveness of farmers. L'objectif de cet article est d'étudier l'aspect économique de l'efficacité de la production des exploitations laitières, avec un accent particulier sur le rôle de la politique agricole. Notre analyse est basée sur un échantillon représentatif d'exploitations laitières irlandaises, allant de 2000 à 2018, qui comprend une période de changement majeur dans la politique laitière de l'UE. Sur la base d'un système de production multi‐entrées multi‐sorties, nous estimons d'abord les efficacités techniques, allocatives, d'échelle et d'envergure. Nous constatons une hétérogénéité importante dans les efficacités techniques et allocatives qui changent avec le temps. Nous calculons également les prix duals des quotas laitiers, ce qui suggère que les quotas laitiers ont restreint de nombreux agriculteurs et limité leur capacité à produire du lait. Enfin, nous explorons les déterminants des inefficacités techniques, allocatives, d'échelle et globales à l'aide d'une régression aléatoire avec données panel censurées. Nous constatons que les subventions sont positivement associées à l'efficacité des exploitations, mais les effets varient sur des périodes distinctes d'abolition des quotas. Dans l'ensemble, nos résultats empiriques indiquent que la politique agricole a eu des effets importants sur l'efficacité de la gestion des agriculteurs.

Suggested Citation

  • Jean‐Paul Chavas & Doris Läpple & Bradford Barham & Emma Dillon, 2022. "An economic analysis of production efficiency: Evidence from Irish farms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 153-173, June.
    • Handle: RePEc:bla:canjag:v:70:y:2022:i:2:p:153-173
    DOI: 10.1111/cjag.12314
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