Rationalising inefficiency in dairy production: evidence from an over-time approach | Zendy

Birhanu Addisu Adamie | Zendy; Helena Hansson | Zendy

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Rationalising inefficiency in dairy production: evidence from an over-time approach

Author(s) -

Birhanu Addisu Adamie,

Helena Hansson

Publication year - 2020

Publication title -

european review of agricultural economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.4

H-Index - 60

eISSN - 1464-3618

pISSN - 0165-1587

DOI - 10.1093/erae/jbaa034

Subject(s) - inefficiency , production (economics) , economics , production efficiency , welfare , process (computing) , panel data , microeconomics , econometrics , economic efficiency , computer science , engineering , market economy , mechanical engineering , operating system

We argue that inefficiency can be part of a strategic self-repositioning adjustment process beyond the general interpretation of poor performance. Based on the rational inefficiency hypothesis, we examine the simultaneous dynamics of efficiency and animal welfare improving investments over time in dairy farms. Using rotating panel data from Swedish dairy farms and implementing multidirectional efficiency analysis and Markov transitional dynamic analysis, the paper provides evidence that for some farms inefficiency is temporary and part of rational decision along their trajectory towards multi-efficiency (high efficiency-high animal welfare). The findings show the importance of time dynamics in efficiency achievements with implications to cross-sectional view.

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