Measuring and Explaining Productivity Change Accounting for Undesirable Outputs: An Application to Dutch Dairy Farms

Speaker: Kexin (Coco) Wang

Affiliation: Wageningen University & Research

Location: Level 6 Boardroom (629), Colin Clark Building (#39), St Lucia Campus

Teams: https://teams.microsoft.com/meet/42479477765668?p=Mo75WMOeZIBHDobgN9

Passcode: VR7WR2Ly

Abstract: The agricultural sector is important for feeding a growing population and reducing emissions, highlighting the need to assess productivity while accounting for emissions. This paper measures and explains total factor productivity (TFP) changes in Dutch dairy farms, accounting for undesirable outputs by rewarding desirable output production and penalizing undesirable output production. We decompose TFP changes into technical change, environmental change, scale and mix efficiency change, good-output-oriented technical efficiency change, bad-output-oriented technical efficiency change, and statistical noise change, based on the by-production technology approach. Using Bayesian methods, we estimate stochastic frontiers for both desirable and undesirable outputs. We employ the dairy sample from the Dutch Farm Accountancy Data Network (FADN), covering 2006 to 2023, with a final sample of 5,675 observations. Preliminary results suggest that overall TFP exhibits an upward trend over the study period, with notable declines in 2008 and 2014. Moreover, Dutch dairy farms operate close to the undesirable-output frontier, with bad-output-oriented technical efficiency remaining relatively stable over the study period, whereas good-output-oriented technical efficiency is more volatile.