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A Reduced-Form Model for Dynamic Efficiency Measurement: Application to Dairy Farms in Germany and The Netherlands

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  • Grigorios Emvalomatis
  • Spiro E. Stefanou
  • Alfons Oude Lansink

Abstract

The stochastic distance function model is extended to allow for the inefficiency component of the error term to be autocorrelated, as implied by a dynamic model of firm behavior. The autocorrelation parameter can then be interpreted as a measure of the persistence of inefficiency. The model is viewed from a state-space perspective, and Kalman filtering techniques are proposed for estimation. The model is applied to two panels of dairy farms from Germany and the Netherlands. The results suggest a very high degree of persistence of inefficiency through time. Copyright 2010, Oxford University Press.

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  • Grigorios Emvalomatis & Spiro E. Stefanou & Alfons Oude Lansink, 2010. "A Reduced-Form Model for Dynamic Efficiency Measurement: Application to Dairy Farms in Germany and The Netherlands," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 161-174.
    • Handle: RePEc:oup:ajagec:v:93:y:2010:i:1:p:161-174
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