A Nonparametric Approach to Multi-product and Product-specific Scale Economies, Economies of Scope, and Cost Efficiency for Kansas Farms

Bryon Parman, Allen Featherstone and Vincent Amanor-Boadu

No 161626, 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas from Southern Agricultural Economics Association

Abstract: Use of nonparametric frontier estimation has been shown to accurately estimate cost frontiers, cost efficiency, and economies of scope in industries. This research uses the nonparametric approach to estimate scope and efficiency as well as multi-product and product-specific economies of scale for Kansas Farms. We find that small farms have a large cost savings advantage through exploiting economies of scale up to $500k in gross revenues. Large farms however have the best opportunity for cost savings through improving efficiency. We also find that the nonparametric approach can estimate an accurate cost frontier from a single year’s data while the parametric approach may require up to 20 years of price variability to generate a reliable frontier.

Keywords: Agribusiness; Crop Production/Industries; Farm Management; Industrial Organization; Production Economics; Productivity Analysis (search for similar items in EconPapers)
Pages: 35
Date: 2014
New Economics Papers: this item is included in nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea14:161626

DOI: 10.22004/ag.econ.161626

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