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Scale Economies and Inefficiency of U.S. Dairy Farms

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  • Roberto Mosheim
  • C.A. Knox Lovell

Abstract

This study employs data drawn from the 2000 Agricultural Resource Management Survey, a U.S. Department of Agriculture-sponsored farmers' survey. The article estimates returns to scale relationships across dairy farms of different sizes and across different regions, incorporating variables hypothesized to influence farm performance. Results point to significant scale economies in U.S. dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies. Contrary to previous research, the preferred cost function specification does not show a region of decreasing returns to scale. This finding helps explain why the average size of dairy farms has been increasing. Copyright 2007, Oxford University Press.

Suggested Citation

  • Roberto Mosheim & C.A. Knox Lovell, 2007. "Scale Economies and Inefficiency of U.S. Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 777-794.
    • Handle: RePEc:oup:ajagec:v:91:y:2007:i:3:p:777-794
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2009.01269.x
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