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Abstract
Technical, allocative and economic efficiency measures are derived for a sample of swine producers in Hawaii using the
parametric stochastic efficiency decomposition technique and nonparametric data envelopment analysis (DEA). Efficiency
measures obtained from the two frontier approaches are compared. Firm-specific factors affecting productive efficiencies are
also analyzed. Finally, swine producers' potential for reducing cost through improved efficiency is also examined. Under the
specification of variable returns to scale (VRS), the mean technical, allocative and economic efficiency indices are 75.9%,
75.8% and 57.1%, respectively, for the paramettic approach and 75.9%, 80.3% and 60.3% for DEA; while for the constant
returns to scale (CRS) they are 74.5%, 73.9% and 54.7%, respectively, for the parametric approach and 64.3%, 71.4% and
45.7% for DEA. Thus the results from both approaches reveal considerable inefficiencies in swine production in Hawaii. The
removal of potential outliers increases the technical efficiencies in the parametric approach and allocative efficiencies in DEA,
but, overall, contrary to popular belief, the results obtained from DEA are found to be more robust than those from the
parametric approach. The estimated mean technical and economic efficiencies obtained from the paramettic technique are
higher than those from DEA for CRS models but quite similar for VRS models, while allocative efficiencies are generally
higher in DEA. However, the efficiency rankings of the sample producers based on the two approaches are highly correlated,
with the highest correlation being achieved for the technical efficiency rankings under CRS. Based on mean compaiison and
rank correlation analyses, the return to scale assumption is found to be crucial in assessing the similarities or differences in
efficiency measures obtained from the two approaches. Analysis of the role of various firm-specific factors on productive
efficiency shows that farm size has strong positive effects on efficiency levels. Similarly, farms producing market hogs are
more efficient than those producing feeder pigs. Based on these results, by operating at the efficient frontier the sample swine
producers would be able to reduce their production costs by 38-46% depending upon the method and returns to scale
considered. © 1999 Elsevier Science B.V. All rights reserved.