Last modified: 2017-03-16
Comparison of Multi-Output Frontier Models: Application to Slovak Agriculture
In this paper the multiple output distance function is used to investigate the technical efficiency of the Slovak agricultural subjects. The main aim of this paper is to compare the results of two chosen stochastic frontier models, namely ratio model and ray model. Furthermore, the effect of Common Agricultural Policy subsidies on the efficiency of farms is estimated. The technical efficiency is studied on the balanced panel data consisting of 308 agricultural subjects for the 7 periods of years 2007-2013. The data is drawn from the Information Sheets of the Ministry of Agriculture and Rural Development of Slovak Republic. The applied distance functions eliminate the main disadvantage of the stochastic frontier analysis. Hence, allowing for the multiple outputs in the analysis. In this paper, there are two outputs considered, namely animal breeding revenues and crop production revenues. The main findings of this paper are similar to the results of previous research. There is a high degree of correlation between the models` estimated efficiencies. The correlation coefficients range from 0.71 to 0.82 for the studied period. Furthermore, the pairwise comparison of the efficiency scores proves no significant difference between the models` estimations. Considering the effect of the subsidies on the efficiency of farms, both models prove the statistically significant impact of the non-investment subsidies. The considered ratio model and ray model not only give similar efficiency estimates, but also similar interpretation of the chosen variables.
Agriculture; Efficiency; Multiple Output; Ratio Model; Ray Model; Stochastic Frontier Analysis; Subsidies
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