Dairy Farm Efficiency Measurement Using Stochastic Frontiers and Neoclassical Duality

Abstract

Abstract This paper presents a stochastic efficiency decomposition model based on Kopp and Diewert's deterministic methodology. The stochastic model is used to analyze technical, economic, and allocative efficiency for a sample of New England dairy farms. The results suggest that mean economic efficiency for the farmers in the sample is about 70% and that, on average, there is little difference between technical (83.0%) and allocative (84.6%) efficiency. Analyses of the relationship between efficiency and four socioeconomic variables—farm size, education, extension, and experience—reveal that, despite some statistically significant associations, efficiency levels are not markedly affected by these variables.