Measuring dynamic efficiency under uncertainty

Silke Huettel, Rashmi Narayana and Martin Odening
Authors registered in the RePEc Author Service: Silke Hüttel

No 129062, Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers from Humboldt University Berlin, Department of Agricultural Economics

Abstract: In this paper we develop a theoretical model that links dynamic efficiency measurement and optimal investment under uncertainty. It is widely acknowledged that uncertainty has an impact on the optimal factor use of a profit maximizing firm. This is particularly true for the optimal adjustment of the firm’s capital stock. While uncertainty has been considered in the static efficiency measurement literature it has been ignored so far in the context of dynamic efficiency measurement. This paper targets at closing this gap. For that purpose we take up a dynamic efficiency model which embeds a stochastic intertemporal duality model into a shadow cost framework and allows for measuring technical and allocative inefficiency. We derive hypotheses on how uncertainty affects the measurement of efficiency. The factor demand equations, which we derive, may serve as a starting point for an empirical validation of these hypotheses.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance; Crop Production/Industries; Demand and Price Analysis; Farm Management (search for similar items in EconPapers)
Pages: 35
Date: 2011-06
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:huscpw:129062

DOI: 10.22004/ag.econ.129062

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