Farms' technical inefficiencies in the presence of government programs *

Teresa Serra, David Zilberman and José M. Gil

Australian Journal of Agricultural and Resource Economics, 2008, vol. 52, issue 1, pages 57-76

Abstract: We focus on determining the impacts of government programs on farms' technical inefficiency levels. We use Kumbhakar's stochastic frontier model that accounts for both production risks and risk preferences. Our theoretical framework shows that decoupled government transfers are likely to increase (decrease) DARA (IARA) farmers' production inefficiencies if variable inputs are risk decreasing. However, the impacts of decoupled payments cannot be anticipated if variable inputs are risk increasing. We use farm-level data collected in Kansas to illustrate the model. Copyright 2008 The Authors.

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