Short-Run and Long-Run Efficiencies of New York Dairy Farms

Short-run and long-run technical and allocative efficiencies were computed for 395 New York dairy farms using data envelopment or nonparametric procedures on 1990 Dairy Farm Business Summary data. The farms were, on average, more allocatively efficient in the short run than in the long run, but were more technically efficient in the long run than in the short run. Stanchion barns were as efficient as milking parlors, and milking more than two times per day did not increase efficiency. Central to modern production analysis are the con-cepts of technical and allocative efficiency (Com-es). Since farmers individually do not know what prices will transpire during a year, the prices they use for planning purposes may be different, lead-ing to allocative inefficiency. They may also fail to equate correct price ratios to the marginal rates of technical substitutions. Likewise, the inability to operate on the frontier of a technology set is in-herent in the concept of the distance function de-fining technical inefficiency. Not surprisingly, ex-tensive efforts have gone into developing alterna-tive techniques to measure efficiencies and empirically apply those various techniques to firm data (Dogramaci and Fare). Bauer discusses recent developments in the econometric estimation of frontiers, and Seiford and Thrall discuss recent de-velopments in the mathematical approach. This paper reports an application of the nonpara-metric or data envelopment technique to measure both the allocative and technical efficiencies of dairy farms. A distinction is made between being efficient in the short run, subject to levels of quasi-fixed inputs, and long-run efficiency, where the allocative and technical efficiency of quasi-fixed inputs as well as variable inputs are computed. Previous empirical applications have calculated long-run efficiency only, but given that most firms can adjust variable inputs more quickly than they can adjust quasi-fixed inputs, the calculation of short-run efficiencies may be of more immediate value. An attempt is then made to explain effi-ciency as a function of farm characteristics. Muc