ESTIMATING ECONOMIC EFFICIENCY UNDER RISK FOR AGRICULTURAL COOPERATIVES

Krisha Prasad Pokharel, Allen Featherstone and David W. Archer

International Journal of Food and Agricultural Economics (IJFAEC), 2019, vol. 07, issue 2

Abstract: This study examined the impact of downside risk on cost efficiency (CE) and revenue efficiency (RE) for a sample of agricultural cooperatives. Downside risk is an appropriate measure of risk as it accounts for loss below the target return level regardless of individuals’ risk preference. The semi-variance of return on equity was used a measure of downside risk. CE and RE were estimated using data envelopment analysis (DEA) without adjusting for downside risk and then re-estimated adjusting for downside risk. The average CE and RE scores were higher with the inclusion of downside risk than the scores without downside risk. The DEA method without accounting for risk overestimates inefficiency and may misguide managers on adjustments needed to improve performance

Keywords: Agricultural and Food Policy; Production Economics; Productivity Analysis; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2019
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https://ageconsearch.umn.edu/record/288687/files/Vol7.No2.pp77.pdf (application/pdf)

Related works:
Working Paper: Estimating Economic Efficiency under Risk for Agricultural Cooperatives (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ijfaec:288687

DOI: 10.22004/ag.econ.288687

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