Sensitivity of technical efficiency estimates to estimation approaches: an investigation using New Zealand dairy industry data
Jaforullah, Mohammad; Premachandra, Erandi
Using data from the New Zealand dairy industry for the year 1993, this paper estimates farm-specific technical efficiencies and mean technical efficiency using three different estimation techniques under both constant returns to scale and variable returns to scale in production. The approaches used are the econometric stochastic production frontier (SPF), corrected ordinary least squares (COLS) and data envelopment analysis (DEA). Mean technical efficiency of the industry is found to be sensitive to the choice of estimation technique. In general, the SPF and DEA frontiers resulted in higher mean technical efficiency estimates than the COLS production frontier.
Publisher: University of Otago
Series number: 306
Keywords: technical efficiency; dairy; production frontier; DEA; New Zealand
Research Type: Discussion Paper