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Endogeneity, heterogeneity, and determinants of inefficiency in Norwegian crop-producing farms

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  • Lien, Gudbrand
  • Kumbhakar, Subal C.
  • Alem, Habtamu

Abstract

This paper addresses the endogeneity of inputs and output (which is mostly ignored in the stochastic frontier (SF) literature) in the SF panel data model under the behavioural assumption that firms maximize returns to the outlay. We consider a four component SF panel data model in which the four components are: firms' latent heterogeneity, persistent inefficiency, transient inefficiency and random shocks. Second, we include determinants in transient inefficiency. Finally, to avoid the impact of distributional assumptions in estimating the technology parameters, we apply a multi-step estimation strategy to an unbalanced panel dataset from Norwegian crop-producing farms observed from 1993 to 2014. Distributional assumptions are made in second and third steps to predict both persistent and transient inefficiency, and their marginal effects.

Suggested Citation

  • Lien, Gudbrand & Kumbhakar, Subal C. & Alem, Habtamu, 2018. "Endogeneity, heterogeneity, and determinants of inefficiency in Norwegian crop-producing farms," International Journal of Production Economics, Elsevier, vol. 201(C), pages 53-61.
    • Handle: RePEc:eee:proeco:v:201:y:2018:i:c:p:53-61
    DOI: 10.1016/j.ijpe.2018.04.023
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    Cited by:

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    3. Raushan Bokusheva & Lukáš Čechura & Subal C. Kumbhakar, 2023. "Estimating persistent and transient technical efficiency and their determinants in the presence of heterogeneity and endogeneity," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(2), pages 450-472, June.
    4. Ferrara, Giancarlo & Kounetas, Konstantinos E., 2024. "US banks efficiency after global financial crisis: Transient and persistent decomposition," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    5. Gangopadhyay, Partha & Jain, Siddharth & Bakry, Walid, 2022. "In search of a rational foundation for the massive IT boom in the Australian banking industry: Can the IT boom really drive relationship banking?," International Review of Financial Analysis, Elsevier, vol. 82(C).
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    7. Biaowen Xu & Xueli Chen, 2024. "Industrial Agglomeration, Land Consolidation, and Agricultural Energy Inefficiency in China: An Analysis Using By-Production Technology and Simultaneous Equations Model," Agriculture, MDPI, vol. 14(11), pages 1-22, October.
    8. Badunenko, Oleg & D’Inverno, Giovanna & De Witte, Kristof, 2023. "On distinguishing the direct causal effect of an intervention from its efficiency-enhancing effects," European Journal of Operational Research, Elsevier, vol. 310(1), pages 432-447.
    9. Manh Hung Do & Trung Thanh Nguyen & Ulrike Grote, 2022. "Is land consolidation policy a solution for rice production and agricultural transformation in Vietnam?," TVSEP Working Papers wp-028, Leibniz Universitaet Hannover, Institute for Environmental Economics and World Trade, Project TVSEP.
    10. Andrew P. Barnes, 2023. "The role of family life‐cycle events on persistent and transient inefficiencies in less favoured areas," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 295-315, February.
    11. Musau, Andrew & Kumbhakar, Subal C. & Mydland, Ørjan & Lien, Gudbrand, 2021. "Determinants of allocative and technical inefficiency in stochastic frontier models: An analysis of Norwegian electricity distribution firms," European Journal of Operational Research, Elsevier, vol. 288(3), pages 983-991.
    12. Habtamu Alem, 2023. "The role of green total factor productivity to farm-level performance: evidence from Norwegian dairy farms," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 11(1), pages 1-16, December.
    13. Amjadi, Golnaz & Lundgren, Tommy, 2022. "Is industrial energy inefficiency transient or persistent? Evidence from Swedish manufacturing," Applied Energy, Elsevier, vol. 309(C).
    14. Habtamu Alem, 2021. "The Role of Technical Efficiency Achieving Sustainable Development: A Dynamic Analysis of Norwegian Dairy Farms," Sustainability, MDPI, vol. 13(4), pages 1-11, February.
    15. Mariarosaria Agostino & Ercan Enzo Comert & Federica Demaria & Sabrina Ruberto, 2024. "What kinds of subsidies affect technical efficiency? The case of Italian dairy farms," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 116-138, January.
    16. Tommy Lundgren & Mattias Vesterberg, 2024. "Efficiency in electricity distribution in Sweden and the effects of small-scale generation, electric vehicles and dynamic tariffs," Journal of Productivity Analysis, Springer, vol. 62(2), pages 121-137, October.
    17. Alemayehu, Fikru K. & Kumbhakar, Subal C. & Landazuri Tveteraas, Sigbjørn, 2022. "Estimation of staff use efficiency: Evidence from the hospitality industry," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    18. Alem, Habtamu, 2020. "Performance of the Norwegian dairy farms: A dynamic stochastic approach," Research in Economics, Elsevier, vol. 74(3), pages 263-271.
    19. Graziella Bonanno & Annalisa Ferrando & Stefania Patrizia Sonia Rossi, 2023. "Do innovation and financial constraints affect the profit efficiency of European enterprises?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 57-86, March.
    20. Amjadi, Golnaz, 2020. "Essays on Energy Efficiency, Environmental Regulation and Labor Demand in Swedish Industry," Umeå Economic Studies 982, Umeå University, Department of Economics.
    21. Kumbhakar, Subal C. & Li, Mingyang & Lien, Gudbrand, 2023. "Do subsidies matter in productivity and profitability changes?," Economic Modelling, Elsevier, vol. 123(C).

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    More about this item

    Keywords

    Efficiency; Endogeneity; Returns to the outlay; Panel data;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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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