Estimation of technical efficiency in Czech agriculture with respect to firm heterogeneity

Abstract

This paper deals with the estimation of technical efficiency in czech agriculture with respect to significant firm heterogeneity. Two main questions are elaborated. The first concerns the choice of a proper model specification, distinguishing between technical inefficiency and firm heterogeneity. The second question is related to the level of technical efficiency. The results show that only those model specifications allowing for the capture of time-invariant firm heterogeneity may provide consistent estimates of technical efficiency. Specifically, the random Parameters family of models is a superior specification for the estimation of technical efficiency in the analysis. Moreover, technical inefficiency is a significant phenomenon in czech agriculture. The average level of technical efficiency is around 90% for agricultural companies.