A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms.

This paper examines farm-level efficiency of U.S. dairy farmers by estimating their technical and allocative inefficiencies. The authors allow technical inefficiency to be a function of some farm-specific characteristics. The model extends the existing stochastic frontier methodology in which determinants of technical inefficiency are explicitly introduced in the model. Empirical results indicate that (1) levels of education of the farmer are important factors determining technical inefficiency and (2) large farms are more efficient (technically) than small and medium-sized farms. Both technical and allocative inefficiencies are found to decrease with an increase in the level of education of the farmer.