Greenhouse Gas Emissions and Eco-Efficiency in Norwegian Dairy Farms : A Dynamic Approach

The current eco-efficiency research in the literature is static, ignoring the intertemporal component of production decisions. Our research adds to the existing body of knowledge on this topic by dynamically modelling the eco-efficiency scores of dairy farms in a parametric frontier framework that accounts for GHG emissions. In this paper, eco-efficiency scores are derived from a production function with both a random intercept and random slope parameters, which overcome the problem of unobserved heterogeneity in stochastic frontier analysis. The study used 30 years of unbalanced panel data from 692 specialist dairy farms (1991-2020). The generalized method of moment estimation is used to compute dynamic boundaries. On the eco-efficiency scale, the dynamic model scored 0.94, while the static model estimated 0.90. Researchers who want to evaluate the farm's eco-efficiency and provide policymakers with advice should look at the dynamic perspective, since there is a statistical difference between the two estimations