Cost Efficiency and its Decomposition for Missouri Grain Farms

Abstract

This study computes and decomposes fann efficiency for Missouri grain farms using a nonparametric cost frontier approach. The results indicate that the overall cost efficiency is 58 percent, suggesting significant inefficiencies exist among sample fanns. MisalIQcation of inputs and improper scale of operation are the major sources of inefficiency. A Tobitrnodel is used to examine the impacts ofvariables such as farm size, specialization, tenancy position, hired labor, and investment on inefficiency, Technical efficiency is independent of fann size, while scale efficiency is not. Improving cost efficiency, particularly allocative and scale efficiencies, would enhance farm profits. (C61, QI2).