PRODUCTIVE EFFICIENCY OF FRENCH GRAIN PRODUCERS - A LATENT VARIABLE MODEL

In this article we propose to implement a covariance structure analysi s to deal with the estimation of a stochastic frontier production func tion on panel data and the measurement of a time-varying technical eff iciency. First, this method solves the potential problem of correlatio ns between input quantities and individual effects. Second, individual effects and efficiency measures can be recovered as a byproduct of th e analysis through the so-called factor scores. We implement this appr oach by fitting to a balanced panel of French grain producers, a parsi monious version of the Cornwell, Schmidt, and Sickles [1990]'s model w here technical efficiencies are individual-specific linear functions o f time. A specification search shows that this model is preferred to t he traditional production function. Results shed light on the temporal pattern of efficiency in the French grain production sector.