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Education, Experience, and Allocative Efficiency: A Dual Approach
Author(s) -
Stefanou Spiro E.,
Saxena Swati
Publication year - 1988
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1242074
Subject(s) - allocative efficiency , dual (grammatical number) , economics , human capital , microeconomics , production–possibility frontier , generalization , econometrics , production (economics) , profit (economics) , variable (mathematics) , production function , efficient frontier , mathematics , financial economics , economic growth , portfolio , art , mathematical analysis , literature
A generalization of the dual, non‐frontier profit function approach to evaluating allocative efficiency is developed that allows for training (human capital) variables to influence the efficiency level directly. An application to Pennsylvania dairy indicates that education and experience are substitutes and play a significant role in the level of efficiency. While these operators are not allocating their variable inputs in an absolutely efficient manner, relative efficiency can be achieved for four of six possible input combinations for prescribed levels of education and experience. Furthermore, the estimates of the efficiency measures suggest that these operators are maximizing production rather than short‐run profits.