Farm-level efficiency and productivity measurement using panel data: wool production in south-west Victoria

In this article we explore some issues surrounding the use of farm-level ef ficiency and productivity estimates for benchmarking studies. Using an eigh t-year balanced panel of Victorian wool producers we analyse annual variati on between estimates of farm-level technical efficiency derived using Data Envelopment Analysis and Malmquist estimates of Total Factor Productivity. We find that farms change their relative rank in terms of efficiency across years. Also, unlike aggregate studies of Total Factor Productivity, we fin d at best erratic and modest growth, a worrying result for this industry. H owever, caution is needed when interpreting these results, and for that mat ter, benchmarking analysis as currently practised when using frontier estim ation techniques like Data Envelopment Analysis.