Econometric estimation of investment utilization, adjustment costs, and technical efficiency in Danish pig farms using hyperbolic distance functions

TY - GEN

T1 - Econometric estimation of investment utilization, adjustment costs, and technical efficiency in Danish pig farms using hyperbolic distance functions

AU - Henningsen, Arne

AU - Fabricius, Ole

AU - Olsen, Jakob Vesterlund

PY - 2014

Y1 - 2014

N2 - Based on a theoretical microeconomic model, we econometrically estimate investment utilization, adjustment costs, and technical efficiency in Danish pig farms based on a large unbalanced panel dataset. As our theoretical model indicates that adjustment costs are caused both by increased inputs and by reduced outputs, we estimate hyperbolic distance functions that account for reduced technical efficiency both in terms of increased inputs and reduced outputs. We estimate these hyperbolic distance functions as “efficiency effect frontiers” with the Translog functional form and a dynamic specification of investment activities by the maximum likelihood method so that we can estimate the adjustment costs that occur in the year of the investment and the three following years. Our results show that investments are associated with significant adjustment costs, especially in the year in which the investment was made. The highest investment utilization is two years after the investment.

AB - Based on a theoretical microeconomic model, we econometrically estimate investment utilization, adjustment costs, and technical efficiency in Danish pig farms based on a large unbalanced panel dataset. As our theoretical model indicates that adjustment costs are caused both by increased inputs and by reduced outputs, we estimate hyperbolic distance functions that account for reduced technical efficiency both in terms of increased inputs and reduced outputs. We estimate these hyperbolic distance functions as “efficiency effect frontiers” with the Translog functional form and a dynamic specification of investment activities by the maximum likelihood method so that we can estimate the adjustment costs that occur in the year of the investment and the three following years. Our results show that investments are associated with significant adjustment costs, especially in the year in which the investment was made. The highest investment utilization is two years after the investment.

M3 - Article in proceedings

SN - 978-87-501-2111-4

T3 - Symposium i anvendt statistik

SP - 42

EP - 51

BT - Symposium i anvendt statistik 2014

A2 - Linde, Peter

PB - Danmarks Statistik

CY - København

T2 - Symposium i Anvendt Statistik

Y2 - 27 January 2014 through 29 January 2014

ER -