Is Input Mix Inefficiency Neglected in Agriculture? A Case Study of Pig-based Farming Systems in England and Wales

Authors

  • David Hadley,

  • Euan Fleming,

  • Renato Villano

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    • David Hadley is a Lecturer, Euan Fleming is a Professor and Renato Villano is a an Associate Professor with the UNE Business School, University of New England, Armidale, NSW 2351, Australia. E-mail: efleming@une.edu.au for correspondence. We thank two anonymous referees and the Editor for comments and suggestions that considerably improved our original text, all remaining errors are our own.


Abstract

The principal concern of this article is the relative importance of input mix as a source of inefficiency. Emphasis in efficiency analysis studies in agricultural production has historically focused on technical inefficiency as a single concept until methodological advances enabled it to be decomposed into pure technical inefficiency and scale inefficiency. But, this advance was insufficient to identify what we consider to be the major source of inefficiency in agricultural production, namely mix inefficiency. We consider that farm enterprises may be particularly susceptible to input mix inefficiency because of restrictions on movement around the frontier isoquant; delays in the adoption of improved technologies embodied in new vintages of production processes; risk as a source of friction in input allocation decisions; and the potential for inconsistency in simultaneously attempting to reach points of allocative efficiency and mix efficiency in input use. We use non-parametric methods to calculate a Hicks–Moorsteen productivity index using panel data for a sample of specialised pig producers in England and Wales. This index is then decomposed into measures of technology, technical efficiency, scale efficiency and mix efficiency for an input orientation. Results of the analysis show that the estimated mean mix inefficiency (0.736) was substantially larger than mean technical inefficiency (0.975) and mean scale inefficiency (0.957) over the study period.

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