Measurement of Dynamic Efficiency: A Directional Distance Function Parametric Approach

This research proposes a parametric estimation of the structural dynamic efficiency measures proposed in 2009 by Silva and Oude Lansink. Overall, technical and allocative efficiency measurements are derived based on a directional distance function and the duality between this function and the optimal value function. The applicability of the parametric proposal is illustrated by assessing dynamic efficiency ratings for a sample of Dutch dairy farms observed from 1995 to 2005. Dynamic efficiency ratings indicate the possibility to achieve long-run cost savings on the order of 12% that are mainly to be accomplished through a reduction in input use.