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This paper provides a way to include explanatory variables that may impact the persistence of farms’ technical inefficiency by extending the conventional parametric dynamic efficiency model. Estimation of the model is performed using typical Bayesian techniques. The empirical findings reveal a high degree of inefficiency persistence through time, which is increasing in the amount of subsidies received, while older farmers exhibit higher inefficiency persistence, as opposed to younger ones, presumably due to their luck of motivation to adopt state-of-the-art technologies.

The effect of farm characteristics on the persistence of technical inefficiency: a case study in German dairy farming