Econometric Estimation of Technical and Environmental Efficiency: An Application to Dutch Dairy Farms

In this article we estimate the technical and environmental efficiency of a panel of Dutch dairy farms. Nitrogen surplus, arising from the application of excessive amounts of manure and chemical fertilizer, is treated as an environmentally detrimental input. A stochastic translog production frontier is specified to estimate the output-oriented technical efficiency. Environmental efficiency is estimated as the input-oriented technical efficiency of a single input, the nitrogen surplus of each farm. The mean output-oriented technical efficiency is rather high, 0.894, but the mean input-oriented environmental efficiency is only 0.441. Intensive dairy farms are both technically and environmentally more efficient than extensive farms. Copyright 1999, Oxford University Press.