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A Shadow‐Price Frontier Measurement of Profit Efficiency in Chinese Agriculture

American Journal of Agricultural Economics, Vol. 78, Issue 1, pp. 146-156, 1996

11 Pages Posted: 25 Mar 2020

See all articles by Jirong Wang

Jirong Wang

Chongqing University of Posts and Telecommunications

Eric J. Wailes

University of Arkansas - Department of Agricultural Economics & Agribusiness

Gail L. Cramer

Louisiana State University, Baton Rouge - Department of Agricultural Economics and Agribusiness

Date Written: February 1996

Abstract

A shadow‐price profit frontier model is developed to examine production efficiency of Chinese farm households. The model incorporates price distortions but retains the advantages of stochastic frontier properties. The shadow prices and shadow profit are derived through a behavioral profit function. Empirical results using household survey data show that the conventional assumption of profit maximization based on market prices is inappropriate. Farmers' resource endowment and education influence their allocative efficiency. Family size, per capita net income, and family members operating as village leaders are positively related to households' production efficiency. Reducing market distortions should increase farm households' production efficiency.

Keywords: China, production efficiency, profit frontier, Q120

Suggested Citation

Wang, Jirong and Wailes, Eric J. and Cramer, Gail L., A Shadow‐Price Frontier Measurement of Profit Efficiency in Chinese Agriculture (February 1996). American Journal of Agricultural Economics, Vol. 78, Issue 1, pp. 146-156, 1996, Available at SSRN: https://ssrn.com/abstract=3560409 or http://dx.doi.org/10.2307/1243786

Jirong Wang (Contact Author)

Chongqing University of Posts and Telecommunications

Eric J. Wailes

University of Arkansas - Department of Agricultural Economics & Agribusiness ( email )

Fayetteville, AR 72701
United States
39-6-5705-6894 (Phone)
39-6-5705-4495 (Fax)

Gail L. Cramer

Louisiana State University, Baton Rouge - Department of Agricultural Economics and Agribusiness ( email )

101 Agricultural Administration Building
Baton Rouge, LA 70803-5604

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