Econometric estimation of technical and environmental efficiency: An application to Dutch dairy farms

In this article we estimate the technical and environmental efficiency of a panel of Dutch dairy farms. Nitrogen surplus, arising from the application of excessive amounts of manure and chemical fertilizer, is treated as an e nvironmentally detrimental input. A stochastic translog production frontier is specified to estimate the output-oriented technical efficiency. Environ mental efficiency is estimated as the input-oriented technical efficiency o f a single input, the nitrogen surplus of each farm. The mean output-orient ed technical efficiency is rather high, 0.894, but the mean input-oriented environmental efficiency is only 0.441. Intensive dairy farms are both tech nically and environmentally more efficient than extensive farms.