An economic analysis of the corn production efficiency of Iowa farm firms
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Disequilibria in product and factor markets force firms to adjust production and reallocate resources. In a dynamic economic environment, production efficiency will depend upon the technical and allocative abilities of farm operators. The human capital approach hypothesizes that technical and allocative abilities are learned as opposed to innate skills;Agriculture is a logical industry to choose for investigating sources of differential firm efficiency. Modern agriculture is characterized by dynamic product and factor markets, rapid technological advances and a relatively uncomplicated management structure. Conceptual models of agricultural production efficiency are formulated. A model of technical efficiency is constructed for analyzing differential rates of adoption and utilization of a single production technology. A model of allocative efficiency is developed for analyzing relative cost efficiency;The corn production efficiency of Iowa farm firms is investigated in the empirical specification and estimation of the models. The data set is the 1976 Iowa Family Farm Survey. The cross-sectional survey of 933 Iowa farm families was designed and conducted by the Statistical Laboratory of Iowa State University;Technical efficiency is analyzed for the type of tillage practice used in corn production. A regression model including variables for profitability and human capital is specified for analyzing differential rates of adoption and utilization of reduced tillage practices. Empirical results indicate that operators of farms with larger corn enterprises, relatively large soybean enterprises, and light, sandy soils will more likely adopt and more fully utilize reduced tillage practices. In addition, the estimates indicate that operators who have completed more years of formal schooling and who frequently utilize information from agricultural extension programs more likely adopt and more fully utilize reduced tillage practices;Allocative efficiency is analyzed for relative cost efficiency in corn production. A measure of relative cost efficiency, the percentage by which actual variables cost differs from a theoretical minimum cost, is derived. A regression model including variables for scale and human capital is specified for analyzing differential cost efficiency. Although there exists considerable noise in the model, empirical results indicate that operators with greater years of farm management experience are more cost efficient relative to operators with fewer years of experience.