Assessing the performance of a nucleus estate and smallholder scheme for oil palm production in West Sumatra: a stochastic frontier analysis

In this paper, we study the performance of smallholders in a nucleus estate and smallholder (NES) scheme in oil palm production schemein West Sumatra by measuring their technical efficiency using a stochastic frontier production function. Our results indicate a mean technical efficiency of 66%, which is below what we would have expected given the uniformity of the climate, soils and plantation construction among the sample farmers. The use of progressive farmers as a means of disseminating extension advice does not appear to have been successful, and more rigorous farmer selection procedures need to be put in place for similar schemes and for general agricultural extension in future. No clear relationship was established between technical efficiency and the use of female labour, suggesting there is no need to target extension services specifically at female labourers in the household. Finally, education was found to have an unexpectedly negative impact on technical efficiency, indicating that farmers with primary education may be more important than those with secondary and tertiary education as targets of development schemes and extension programs entailing non-formal education. (C) 2003 Elsevier Ltd. All rights reserved.

Lameness, metabolic and digestive disorders, and technical efficiency in Danish dairy herds: a stochastic frontier production function approach

The relationship between reported treatments of lameness, metabolic disorders (milk fever, ketosis), digestive disorders, and technical efficiency (TE) was investigated using neutral and non-neutral stochastic frontier analysis (SFA). TE is estimated relative to the stochastic frontier production function for a sample of 574 Danish dairy herds collected in 1997. Contrary to most published results, but in line with the expected negative impact of disorders on the average cow milk production, herds reporting higher frequencies of milk fever are less technically efficient. Unexpectedly, however, the opposite results were observed for lameness, ketosis, and digestive disorders. The non-neutral stochastic frontier indicated that the opposite results are due to the relative. high productivities of inputs. The productivity of the cows is also reflected by the direction of impact of herd management variables. Whereas efficient farms replace cows more frequently, enroll heifers in production at an earlier age, and have shorter calving intervals, they also report higher frequency of disorder treatments. The average estimated energy corrected milk loss per cow is 1036, 451 and 242 kg for low, medium and high efficient farms. The study demonstrates the benefit of the stochastic frontier production function involving the estimation of individual technical efficiencies to evaluate farm performance and investigate the source of inefficiency. (C) 2004 Elsevier B.V. All rights reserved.

Relationships of Efficiency to Reproductive Disorders in Danish Milk Production: A Stochastic Frontier Analysis

Relationships of various reproductive disorders and milk production performance of Danish dairy farms were investigated. A stochastic frontier production function was estimated using data collected in 1998 from 514 Danish dairy farms. Measures of farm-level milk production efficiency relative to this production frontier were obtained, and relationships between milk production efficiency and the incidence risk of reproductive disorders were examined. There were moderate positive relationships between milk production efficiency and retained placenta, induction of estrus, uterine infections, ovarian cysts, and induction of birth. Inclusion of reproductive management variables showed that these moderate relationships disappeared, but directions of coefficients for almost all those variables remained the same. Dystocia showed a weak negative correlation with milk production efficiency. Farms that were mainly managed by young farmers had the highest average efficiency scores. The estimated milk losses due to inefficiency averaged 1142, 488, and 256 kg of energy-corrected milk per cow, respectively, for low-, medium-, and high-efficiency herds. It is concluded that the availability of younger cows, which enabled farmers to replace cows with reproductive disorders, contributed to high cow productivity in efficient farms. Thus, a high replacement rate more than compensates for the possible negative effect of reproductive disorders. The use of frontier production and efficiency/ inefficiency functions to analyze herd data may enable dairy advisors to identify inefficient herds and to simulate the effect of alternative management procedures on the individual herd's efficiency.

Trade liberalisation and technical efficiency: Evidence from Bangladesh manufacturing industries

The paper investigates the effects of trade liberalisation on the technical efficiency of the Bangladesh manufacturing sector by estimating a combined stochastic frontier-inefficiency model using panel data for the period 197894 for 25 three-digit level industries. The results show that the overall technical efficiency of the manufacturing sector as well as the technical efficiencies of the majority of the individual industries has increased over time. The findings also clearly suggest that trade liberalisation, proxied by export orientation and capital deepening, has had significant impact on the reduction of the overall technical inefficiency. Similarly, the scale of operation and the proportion of non-production labour in total employment appear as important determinants of technical inefficiency. The evidence also indicates that both export-promoting and import-substituting industries have experienced rises in technical efficiencies over time. Besides, the results are suggestive of neutral technical change, although (at the 5 per cent level of significance) the empirical results indicate that there was no technical change in the manufacturing industries. Finally, the joint test based on the likelihood ratio (LR) test rejects the Cobb-Douglas production technology as description of the database given the specification of the translog production technology.

A metafrontier production function for estimation of technical efficiencies and technology gaps for firms operating under different technologies

This paper presents a metafrontier production function model for firms in different groups having different technologies. The metafrontier model enables the calculation of comparable technical efficiencies for firms operating under different technologies. The model also enables the technology gaps to be estimated for firms under different technologies relative to the potential technology available to the industry as a whole. The metafrontier model is applied in the analysis of panel data on garment firms in five different regions of Indonesia, assuming that the regional stochastic frontier production function models have technical inefficiency effects with the time-varying structure proposed by Battese and Coelli ( 1992).

A Bayesian approach to imposing curvature on distance functions

The estimated parameters of output distance functions frequently violate the monotonicity, quasi-convexity and convexity constraints implied by economic theory, leading to estimated elasticities and shadow prices that are incorrectly signed, and ultimately to perverse conclusions concerning the effects of input and output changes on productivity growth and relative efficiency levels. We show how a Bayesian approach can be used to impose these constraints on the parameters of a translog output distance function. Implementing the approach involves the use of a Gibbs sampler with data augmentation. A Metropolis-Hastings algorithm is also used within the Gibbs to simulate observations from truncated pdfs. Our methods are developed for the case where panel data is available and technical inefficiency effects are assumed to be time-invariant. Two models-a fixed effects model and a random effects model-are developed and applied to panel data on 17 European railways. We observe significant changes in estimated elasticities and shadow price ratios when regularity restrictions are imposed. (c) 2004 Elsevier B.V. All rights reserved.

Estimating variable returns to scale production frontiers with alternative stochastic assumptions

Two stochastic production frontier models are formulated within the generalized production function framework popularized by Zellner and Revankar (Rev. Econ. Stud. 36 (1969) 241) and Zellner and Ryu (J. Appl. Econometrics 13 (1998) 101). This framework is convenient for parsimonious modeling of a production function with returns to scale specified as a function of output. Two alternatives for introducing the stochastic inefficiency term and the stochastic error are considered. In the first the errors are added to an equation of the form h(log y, theta) = log f (x, beta) where y denotes output, x is a vector of inputs and (theta, beta) are parameters. In the second the equation h(log y,theta) = log f(x, beta) is solved for log y to yield a solution of the form log y = g[theta, log f(x, beta)] and the errors are added to this equation. The latter alternative is novel, but it is needed to preserve the usual definition of firm efficiency. The two alternative stochastic assumptions are considered in conjunction with two returns to scale functions, making a total of four models that are considered. A Bayesian framework for estimating all four models is described. The techniques are applied to USDA state-level data on agricultural output and four inputs. Posterior distributions for all parameters, for firm efficiencies and for the efficiency rankings of firms are obtained. The sensitivity of the results to the returns to scale specification and to the stochastic specification is examined. (c) 2004 Elsevier B.V. All rights reserved.