Cost Efficiency and its Decomposition for Missouri Grain Farms

Shunxiang Wu, Tony Prato and Michael Kaylen
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Tony Prato: University of Missouri
Michael Kaylen: University of Missouri

Journal of Economic Insight, 2005, vol. 31, issue 2, 19-44

Abstract: This study computes and decomposes farm efficiency for Missouri grain farms using a nonparametric cost frontier approach. The results indicate that the overall cost efficiency is 58 percent, suggesting significant inefficiencies exist among sample farms. Misallocation of inputs and improper scale of operation are the major sources of inefficiency. A Tobit model is used to examine the impacts of variables such as farm size, specialization, tenancy position, hired labor, and investment on inefficiency. Technical efficiency is independent of farm size, while scale efficiency is not. Improving cost efficiency, particularly allocative and scale efficiencies, would enhance farm profits.

JEL-codes: C61 Q12 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:31:y:2005:i:2:p:19-44

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