Why considering technological heterogeneity is important for evaluating farm performance?

A split-panel latent class stochastic frontier model is applied to account for technological heterogeneity among Swiss dairy farms and to assess the potential performance improvements through technology choice and change over 11 years. Three technology classes with substantially different productivity levels are identified considering the unobserved and observed farm characteristics. Technologies seem on average well adapted to local natural production conditions with low potential for efficiency and productivity increases. Few farms changed technology over time and either an intensification or extensification strategy was observed. Policymakers must be aware of the interlinkages between technology choices and the economic situation of farms.

Automated summary

This study applied a split-panel latent class stochastic frontier model to analyze technological heterogeneity among Swiss dairy farms and the potential performance improvements through technology choice and change over 11 years. Three technology classes with different productivity levels were identified, showing that technologies are generally well adapted to local production conditions with limited potential for efficiency and productivity increases. Few farms changed technology over time, with observed intensification or extensification strategies. Policymakers need to consider the interlinkages between technology choices and farm economics.