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Does Intensification Help to Improve the Economic Efficiency of Dairy Farms?

Antonio Alvarez, Julio del Corral (), Daniel Solis () and José Antonio Pérez

No 2007/04, Efficiency Series Papers from University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG)

Abstract: During recent decades the dairy sector has shown a global tendency towards intensification. This structural change may have significant effects on farm efficiency. The goal of this study is to offer an empirical analysis of the effect of intensification on dairy farming. To do this, we first classify our sample of dairy farms according to their level of intensification using a cluster analysis. We then estimate independent stochastic cost frontiers for each group of farms and calculate their levels of efficiency. The methodology used in this article allows for the presence of different technologies within the sample, a methodological issue frequently avoided in the empirical literature. The empirical results show that intensive farms are closer to their cost frontier than the extensive ones, suggesting a positive relation between intensification and efficiency.

Keywords: cluster analysis; efficiency; intensification; stochastic cost frontier (search for similar items in EconPapers)
Date: 2007
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Handle: RePEc:oeg:wpaper:2007/04