Table 2. Estimates of Actual Revenue (R), Potential Revenue (POTR), Constant Returns to Scale Revenue
(CRTSR), Absolute Pure Technical, Scale, and Total Inefficiency, and Pure Technical and Total
Efficiency Ratios by Year and Two-Year, Three-Year, and Six-Year Average Periods for 170
Central Illinois Grain Farms
|
Year |
Obs. |
R |
POTR |
CRTSR |
Inefficiency________ |
Efficiency Ratio | |||
|
Pure |
Scale |
Total |
Pure |
Total | |||||
|
No. |
......... |
......dollars....... |
......... | ||||||
|
82 |
170 |
174,226 |
285,798 |
332,029 |
111,572 |
46,231 |
157,803 |
0.61 |
0.52 |
|
83 |
170 |
179,652 |
274,069 |
312,087 |
94,417 |
38,018 |
132,435 |
0.66 |
0.58 |
|
84 |
170 |
177,850 |
299,171 |
351,930 |
121,321 |
52,759 |
174,080 |
0.59 |
0.51 |
|
85 |
170 |
209,303 |
303,156 |
346,306 |
93,853 |
43,150 |
137,003 |
0.69 |
0.60 |
|
86 |
170 |
177,529 |
270,589 |
309,620 |
93,060 |
39,031 |
132,091 |
0.66 |
0.57 |
|
87______ |
170 |
179,869 |
274,205 |
322,502 |
94,336 |
48,297 |
142,633 |
0.66 |
0.56 |
|
82-83 |
170 |
176,939 |
242,074 |
263,946 |
65,135 |
21,872 |
87,007 |
0.73 |
0.67 |
|
83-84 |
170 |
178,751 |
268,751 |
299,868 |
90,000 |
31,117 |
121,117 |
0.67 |
0.60 |
|
84-85 |
170 |
193,577 |
293,233 |
335,071 |
99,656 |
41,838 |
141,494 |
0.66 |
0.58 |
|
85-86 |
170 |
193,416 |
283,049 |
320,308 |
89,633 |
37,259 |
126,892 |
0.68 |
0.60 |
|
86-87 |
170 |
178,699 |
261,415 |
297,491 |
82,716 |
36,076 |
118,792 |
0.68 |
0.60 |
|
82-84 |
170 |
177,243 |
252,647 |
276,984 |
75,404 |
24,337 |
99,741 |
0.70 |
0.64 |
|
83-85 |
170 |
188,935 |
270,621 |
299,535 |
81,686 |
28,914 |
110,600 |
0.70 |
0.63 |
|
84-86 |
170 |
188,228 |
278,448 |
314,640 |
90,220 |
36,192 |
126,412 |
0.68 |
0.60 |
|
85-87 |
170 |
188,900 |
273,277 |
308,963 |
84,377 |
35,686 |
120,063 |
0.69 |
0.61 |
|
82-87 |
170 |
183,072 |
256,844 |
281,955 |
73,772 |
25,111 |
98,883 |
0.71 |
0.65 |
revenue from the constant returns to scale revenue.
The sum of the two types of inefficiency, pure
technical and scale, was thus a measure of the total
inefficiency associated with each sample farm. A
total efficiency ratio is expressed as actual revenue
divided by the constant returns to scale revenue.
RESULTS
Six yearly and ten aggregate estimates of farm
efficiency were examined in this analysis. The
yearly estimates include farm data by year and are
comparable to efficiency estimates of previous stud-
ies while demonstrating changes in single-year esti-
mates over time. The aggregate estimates were
obtained by averaging income and expenditure data
by farm for the two-year periods 1982-1983, 1983-
1984, 1984-1985, 1985-1986, and 1986-1987; for
the three-year periods 1982-1984,1983-1985,1984-
1986, and 1985-1987; and for the six-year period
1982-1987.
Yearly and Multiple-Year Efficiency
The first six rows of Table 2 summarize the esti-
mates of the extent of pure technical, scale, and total
116
inefficiency, on average, by year. Each of the yearly
equation estimations used to calculate the efficiency
measures fit extremely well with R2s in the 0.83-
0.91 range. All explanatory variables are significant
at the 1 percent confidence level. Because the pa-
rameter estimates have limited economic meaning,
only the results from one of the estimations (1982-
1987 average data, the last line in Table 2) are
presented (Table 3). The actual revenue (R) of the
farms ranged, on average, from $174,226 in 1982 to
$209,303 in 1985. The potential revenue (POTR) in
each year represents the amount that could be pro-
duced by an average farm in the absence of any pure
technical inefficiency. The constant returns to scale
revenue (CRTSR) indicates the potential level of
revenue attainable in the absence of pure technical
and scale inefficiencies. Two efficiency ratios are
reported, the pure technical efficiency ratio
(R∕POTR) and the total efficiency ratio (R∕CRTSR).
The total efficiency ratio of the farms throughout the
1982-1987 period ranges from a low of 0.51 in 1984
to a high of 0.60 in 1985. The total inefficiency of
the farms can be approximately divided up as 70
percent pure technical inefficiency and 30 percent