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Nonparametric Evaluation of Economies of Scope in the Context of Technical Efficiency: The Case of Rice and Vegetable Farms in K orea
Author(s) -
Kim Kwansoo,
An Donghwan
Publication year - 2015
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12059
Subject(s) - inefficiency , data envelopment analysis , diversification (marketing strategy) , economics , convexity , economies of scope , scope (computer science) , context (archaeology) , nonparametric statistics , econometrics , microeconomics , economies of scale , business , financial economics , mathematics , statistics , marketing , computer science , geography , archaeology , programming language
This paper provides a nonparametric evaluation of economies of scope in the context of technical efficiency allowing for non‐convexity, with an application to Korean rice and vegetable farms. Relying on non‐parametric‐free disposal hull and data envelopment analysis approaches and input–output data for rice and vegetable farms from the Korea Farm Household Economy Survey data collected in 2007, this article examines technical inefficiency and its decomposition under non‐convexity and convexity. Empirical measures of technical inefficiency and its decomposition results are provided, with a focus on a component of technical inefficiency associated with economies of scope (i.e. diversification benefits) under non‐convexity in production technology. The decomposition measures of technical inefficiency include pure technical inefficiency, size inefficiency and diversification inefficiency. The results provide empirical evidence supporting size‐dependent diversification strategies, where benefits of diversification are larger for small farms on average compared to those of large farms.