Estimating the Potential Gains from Mergers: The Danish Agricultural Extension Services

We introduce simple non-parametric models to estimate the potential gains from merging production units. Three effects are distinguished. A merger may affect technical efficiency. It also affects the size of the operation which may or may not be advantageous depending on the return to scale properties of the underlying technologies. Lastly, it affects the mix of inputs available and the mix of outputs demanded. A merged unit face more "balanced" or "harmonic" input and output profiles which is typically advantageous. We use the model to estimate the potential gains from merging agricultural extension offices in Denmark