Measuring efficiency of the Farm Credit System

The paper measures the U.S. Farm Credit System’s technical efficiency from 2000 to 2009 using a stochastic frontier production function model with quarterly unbalanced panel data. The paper's results suggest that the FCS has not efficiently utilized their inputs. On an average, the system realizes only 9.7% of their technical abilities in raising their loans, leases and investment. The efficiency of the whole system is estimated to slightly increase over time even during financial crisis period from 2007. Among the system, a significant difference in efficiency between the 5 Banks and the Associations has been found. On average, the Banks have higher technical efficiency of 62.4% compared to that of 7.7% of the associations. The efficiency of the latter increases by a small rate over time during 2004-2009 periods while efficiency of the former is more time-varying and experiences the opposite pattern. No evidence about the impact of financial crisis on the system efficiency was found.