Nonparametric Evaluation of Economies of Scope in the Context of Technical Efficiency: The Case of Rice and Vegetable Farms in Korea |
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| Authors: | Kwansoo Kim Donghwan An |
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| Affiliation: | Department of Agricultural Economics and Rural Development, Research Institute of Agriculture and Life Sciences, College of Agriculture and Life Sciences, Seoul National University, Seoul, Korea |
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| Abstract: | This paper provides a nonparametric evaluation of economies of scope in the context of technical efficiency allowing for non‐convexity, with an application to Korean rice and vegetable farms. Relying on non‐parametric‐free disposal hull and data envelopment analysis approaches and input–output data for rice and vegetable farms from the Korea Farm Household Economy Survey data collected in 2007, this article examines technical inefficiency and its decomposition under non‐convexity and convexity. Empirical measures of technical inefficiency and its decomposition results are provided, with a focus on a component of technical inefficiency associated with economies of scope (i.e. diversification benefits) under non‐convexity in production technology. The decomposition measures of technical inefficiency include pure technical inefficiency, size inefficiency and diversification inefficiency. The results provide empirical evidence supporting size‐dependent diversification strategies, where benefits of diversification are larger for small farms on average compared to those of large farms. |
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| Keywords: | data envelopment analysis directional distance function diversification economies of scope free disposal hull technical efficiency size D22 D24 Q12 |
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