Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 17: Generalized Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants

Finn R. Førsund and Lennart Hjalmarsson
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Finn R. Førsund: University of Oslo
Lennart Hjalmarsson: Research Institute of Industrial Economics (IFN)

Abstract: This paper is concerned with the measurement of productive efficiency. Farrell's measures of efficiency are generalized to nonhomogeneous production functions. Several new measures of efficiency have been introduced and applied to the Swedish milk processing industry. The empirical analysis is based on a complete set of cross section- time series data for a period of la years of 28 individual plants producing a homogeneous product, pasteurized milk. Industrial structure and structural change are examined by both studying the shape of the efficiency distributions for the individual units and their changes through time. The aggregate performance of the sector is studied by the development of the different measures of structural efficiency.

Keywords: Agriculture; Technical progress; Production function

JEL-codes: O13; Q16

28 pages, May 1978

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