Provision of an environmental output within a multi-output distance function approach

Francisco Areal, Richard Tiffin () and Kelvin Balcombe

MPRA Paper from University Library of Munich, Germany

Abstract: This paper redefines technical efficiency by incorporating provision of environmental goods as one of the outputs of the farm within a multi-outptut distance function framework. Permanent and rough grassland area are used as a proxy for the provision of environmental goods. The multi-output distance function approach is used to estimate technical efficiency. A Bayesian procedure involving the use of a Gibbs sampler is used to estimate the farm specific efficiency as well as the coefficients of the distance function. In addition, a number of explanatory variables for the efficiency were introduced in the analysis and posterior distributions of those were obtained. The methodology is applied to panel data on 215 dairy farms in England and Wales from the Defra Farm Business Survey. Results show that both farm efficiency rankings and determinants of inefficiency change when provision of environmental outputs by farms is incorporated in the efficiency analysis, which may have important political implications.

Keywords: Technical efficiency; environmental good; multi-output (search for similar items in EconPapers)
JEL-codes: C11 C13 C23 C51 Q12 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-agr, nep-eff and nep-env
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Related works:
Journal Article: Provision of environmental output within a multi-output distance function approach (2012)
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