Bayesian Estimation of Technical Efficiency of a Single Input

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2000-11-01
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Kurkalova, Lyubov
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Carriquiry, Alicia
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Center for Agricultural and Rural Development

The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.

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We propose estimation of a stochastic production frontier model within a Bayesian framework to obtain the posterior distribution of single-input-oriented technical efficiency at the firm level. The proposed method is applicable to the estimation of environmental efficiency of agricultural production when the technology interaction with the environment is modeled via public inputs such as soil quality and environmental conditions. All computations are carried out using Markov chain Monte Carlo methods. We illustrate the approach by applying it to production data from Ukrainian collective farms.

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