EXPLAINING OUTPUT GROWTH WITH A HETEROSCEDASTIC NON-NEUTRAL PRODUCTION FRONTIER: THE CASE OF SHEEP FARMS IN GREECE

This paper extends the primal decomposition of TFP changes to the case of non-neutral production frontiers. Output growth is decomposed into input growth (size effect), changes in technical efficiency, technical change, and the effect of returns to scale. Within the proposed formulation, however, technical efficiency changes are attributed not only to autonomous changes (i.e., passage of time) but also to changes in input use and in the not-so-fixed farm characteristics. The empirical model is based on a heteroscedastic non-neutral production frontier and an unbalanced panel data set of sheep farms in Greece for the period 1989-92. The technical efficiency change effect is found to be the main source of TFP growth, followed by technical change and the scale effect, which has caused a 0.35% output slowdown The not-so-fixed farm characteristics have been the most important determinant of technical efficiency changes, followed by changes in input use.