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Efficiency Measurement in Swedish Dairy Farms: An Application of Rotating Panel Data, 1976–88
Author(s) -
Kumbhakar Subal C.,
Heshmati Almas
Publication year - 1995
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 - 10.2307/1243233
Subject(s) - inefficiency , residual , econometrics , panel data , component (thermodynamics) , production (economics) , mathematics , statistics , economics , computer science , microeconomics , algorithm , physics , thermodynamics
In this paper we introduce a new specification of technical inefficiency in panel data models. First, the overall technical inefficiency is decomposed into a persistent component and a residual component. Second, a multistep procedure is used to estimate the parameters of the production function as well as persistent and residual technical inefficiency. The advantage of this multistep procedure is that the parameter estimates are robust to distributional assumptions on the error components. Distributional assumptions are required in the final stage to estimate the residual component of technical inefficiency. The model is used to examine technical efficiency in Swedish dairy farms during the period 1976 to 1988.