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Cost Efficiency of Dairy Farming in New Zealand: A Stochastic Frontier Analysis

Published online by Cambridge University Press:  15 September 2016

Nan Jiang  and
Basil Sharp
Nan Jiang*
Affiliation:
Economics Department of the Business Faculty of Auckland University of Technology
Basil Sharp
Affiliation:
Economics Department of the Business Faculty of University of Auckland
*
Correspondence: Nan Jiang ▪ Economics Department ▪ Auckland University of Technology ▪ Auckland ▪ New Zealand ▪ Phone +64.9.9219999 ext 8315 ▪ Email[email protected].
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Abstract

Research on the efficiency of dairy farming in New Zealand is limited and has focused predominantly on technical efficiency. We contribute to the literature on empirical analysis by examining cost efficiency of New Zealand dairy farms. We construct simplified translog stochastic cost frontiers based on an unbalanced panel of 824 farms. Average cost efficiency is estimated at 83 percent for dairy farms in the North Island and 80 percent for farms in the South Island. Our analysis of the relationship between inefficiency and farm characteristics suggests significant associations between cost efficiency and capital intensity, livestock quality, and farm size.

Keywords

cost efficiencyNew Zealand dairy farmingstochastic frontier
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 43 , Issue 3 , December 2014 , pp. 406 - 418
Copyright
Copyright © 2014 Northeastern Agricultural and Resource Economics Association 

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