Dynamic Profit Inefficiency: A DEA Application to Belgian Dairy Farms

Using a nonparametric framework, we analyze dynamic profit inefficiency for a sample of Belgian, specialized dairy farms from 1996–2008. Profit inefficiency is decomposed into contributions of output, input, and investment. Moreover, we identify the contributions of technical and allocative inefficiency in each input and output. The results suggest substantial profit inefficiency under the current dairy-quota system, mainly driven by an average underproduction of approximately 50 percent and an average underuse of variable inputs of approximately 60 percent, due to allocative inefficiency. Consequently, abolishing the dairy-quota system in 2015 may considerably increase demand for variable inputs and supply of output.


Issue Date:
2014-03
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/165693
Total Pages:
22
JEL Codes:
D22; D24; D92; Q12
Series Statement:
Bioeconomics Working Paper Series
2014/3




 Record created 2017-04-01, last modified 2017-08-27

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