Accounting for technology heterogeneities and policy change in farm level efficiency analysis: an application to the Irish beef sector

This paper assesses the consequences of technological heterogeneity when analysing the effects of policy changes on technical efficiency, using Irish beef farming as a case study. A latent class stochastic frontier model is... [ view full abstract ]

This paper assesses the consequences of technological heterogeneity when analysing the effects of policy changes on technical efficiency, using Irish beef farming as a case study. A latent class stochastic frontier model is estimated. Results suggest that a single frontier model overestimates technical inefficiency compared to the model where technology heterogeneity is accounted for. The paper also evaluates factors that influence technical efficiency, particularly the impacts of the 2003 reform of the Common Agricultural Policy. Model results indicate that the introduction of decoupled payments had heterogeneous effects across farms, identifying a significant positive effect on efficiency only for a subset of farms. Robustness checks carried out for this result confirm the findings.