Technological Differences, Theoretical Consistency, and Technical Efficiency: The Case of Hungarian Crop-Producing Farms
Imre Fertő () and
Heinrich Hockmann ()
Additional contact information
Imre Fertő: Institute of Economics, Centre for Economic and Regional StudiesAgricultural Economics and Rural Development Research Unit, 1097 Budapest, Hungary
Heinrich Hockmann: Leibniz Institute of Agricultural Developmetn in Transition Economics (IAMO), Agricultural Markets, Marketing and World Agricultural Trade (Agricultural Markets) department, 06120 Halle (Saale), Germany
Sustainability, 2020, vol. 12, issue 3, 1-18
Effective agricultural policymaking requires the accurate estimation of the production technology and efficiency of farms. However, several methodological issues should be considered when modelling production and estimating technical efficiency. In this paper, we focus on two of these—technological heterogeneity and theoretical consistency—as implied in microeconomic theory. Heterogeneity in the efficiency literature is often evaluated using a variable intercept model. However, in farm production, it is likely that heterogeneity also affects the marginal productivity of production factors. Some earlier papers investigated the effect of unobserved heterogeneity on technical efficiency using latent class models, but the application of random parameter models is limited. One of our main contributions in this paper is that we apply a modified version of a random parameter model to investigate the effect of unobserved heterogeneity on production factors and efficiency. The second aim was to impose regularity conditions into the model through introducing linear and non-linear constraints and thereby investigate their significance. Third, we examined the relationship between unobserved heterogeneity and the natural and economic conditions of farms. Our findings show that heterogeneity has a greater effect on variation in output than technical efficiency; furthermore, the violation of theoretical consistency significantly influences the results. These findings also reveal that the explanatory power of regional natural and economic conditions is significant but not sufficient on the variance of estimated unobserved heterogeneity.
Keywords: technical efficiency; monotonicity; quasi-concavity; theoretical consistency Random Parameter Model; RPM; heterogeneity (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Journal Article: Technological differences, theoretical consistency, and technical efficiency: The case of Hungarian crop-producing farms (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:3:p:1147-:d:316966
Access Statistics for this article
Sustainability is currently edited by Prof. Dr. Marc A. Rosen
More articles in Sustainability from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().