Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform

Catherine Morrison Paul, Warren E. Johnston and Gerald A. G. Frengley

The Review of Economics and Statistics, 2000, vol. 82, issue 2, 325-337

Abstract: In this study, we consider the impacts of dramatic regulatory reform during the 1980s on the efficiency of farms in New Zealand, using unbalanced panel data. A translog distance function representing the multiple output and input technology and incorporating nonneutral regulatory impacts is used for the analysis. Determinants of technical inefficiency, including a regulatory variable, a time term, and a debt/equity ratio, are also incorporated in a one-step model estimated by maximum-likelihood, stochastic production frontier methods. We find evidence of regulatory-induced changes in output composition - toward beef and deer, and away from wool, and especially lamb - but little associated technical inefficiency. These patterns motivated investment in complementary capital, land, and beef/deer livestock inputs. Firms that were more flexible in their adaptation toward these new mixes adjusted to regulatory changes with less upheaval, so any existing inefficiency appears linked to debt/ equity levels. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 2000
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