An evaluation of technical efficiency among heterogeneous dairy farms

Abstract

An unbalanced panel data including 1,151 farm observations from 2004 to 2008 was used to analyze the 
determinants of technical efficiency (TE) for dairy farms in the State of Wisconsin. To account for farm 
heterogeneity in our analysis we implemented a two-step framework using a stochastic production 
frontier and a quantile regression analysis. The results show that the determinants of TE affected 
farmers with different levels of TE in a very specific ways. This outcome is of significant importance 
from an empirical point of view. Farmers could use this knowledge to find alternatives to improve their 
specific level of performance. Additionally, Policy makers could use this information to improve the 
effectiveness of their policies by targeting specific agricultural services and aid to group of farmers 
with similar levels of TE.