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Scale Economies, Technical Efficiency, and the Sources of Total Factor Productivity Growth of Quebec Dairy Farms
Author(s) -
Singbo Alphonse,
Larue Bruno
Publication year - 2016
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/cjag.12077
Subject(s) - productivity , economies of scale , production (economics) , total factor productivity , production–possibility frontier , agricultural economics , scale (ratio) , returns to scale , economics , stochastic frontier analysis , frontier , panel data , technical change , business , agricultural science , economy , econometrics , geography , environmental science , economic growth , microeconomics , cartography , archaeology
Canada's average cost for milk production is among the highest in the world. This paper focuses on specific potential causes by estimating economies of scale and technical efficiency for a panel of Quebec dairy farms that spans the 2001–10 period. Additionally, this paper investigates the sources of total factor productivity growth. The stochastic frontier analysis, based on an input‐distance function, is used to estimate returns to scale relationships across dairy farms. The results show that there is significant economies scale to be exploited and that cost of production could also be reduced by improving technical efficiency. Accordingly, the paper indicates that input‐mix effect is the main source of total factor productivity growth. The results have important implications for Canada's supply management policy, and more specifically for the trading of production quota between dairy farmers, as well as for the delivery of targeted extension services.