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European Review of Agricultural Economics 2005 32(1):51-74; doi:10.1093/erae/jbi004
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Vol. 32 No. 1 Oxford University Press and Foundation for the European Review of Agricultural Economics 2005; all rights reserved. For permissions, please email journals.permissions@oupjournals.org; all rights reserved

Explaining output growth with a heteroscedastic non-neutral production frontier: the case of sheep farms in Greece

Giannis Karagiannis

University of Macedonia, Greece

Vangelis Tzouvelekas

University of Crete, Rethymno, Greece

Corresponding author: Vangelis Tzouvelekas, Department of Economics, University of Crete, University Campus, 74 100 Rethymno, Crete, Greece. Email: vangelis{at}econ.soc.uoc.gr

Received June 2003; Revision received November 2004.

Summary

This paper extends the primal decomposition of total factor productivity (TFP) changes to the case of non-neutral production frontiers. Output growth is decomposed into input growth (size effect), changes in technical efficiency, technical change, and the effect of returns to scale. Within the proposed formulation, however, technical efficiency changes are attributed not only to autonomous changes (i.e. passage of time) but also to changes in input use and in farm-specific characteristics. A heteroscedastic non-neutral production frontier is estimated for an unbalanced panel of Greek sheep farms for the period 1989–1992. Technical efficiency change is found to be the main source of TFP growth. The farm-specific characteristics were the most important determinant of technical efficiency changes.

Keywords: primal approach, scale effect, TFP decomposition, stochastic frontier model


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