Rationalising inefficiency in agricultural production – the case of Swedish dairy agriculture

Formulation and estimation of stochastic frontier production function models

Helena Hansson, Gordana Manevska-Tasevska and Mette Asmild

European Review of Agricultural Economics, 2020, vol. 47, issue 1, 1-24

Abstract: Inefficiency in agricultural production is generally interpreted as waste in the use of production factors. We challenge this by (i) providing an explanation for why apparent inefficiency may result, at least partly, from rational production decisions by farmers and (ii) testing this rational inefficiency hypothesis empirically. Based on multidirectional efficiency analysis of production data from 2013 for 421 Swedish dairy farms and statistical analyses of the inefficiency patterns, we provide support for the existence of rational inefficiency. These findings have clear implications for policy schemes aiming at pushing farms towards the efficient production frontier.

Keywords: dairy farms; non-use values; rational inefficiency; use values; multidirectional efficiency analysis (MEA) (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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