Technical and Environmental efficiencies and Best Management Practices in Agriculture

An Input Distance Function (IDF) is estimated to empirically evaluate and analyse the technical and environmental efficiencies of 210 farms located in the Chaudiere watershed (Quebec), where water quality problems are particularly acute because of the production of undesirable outputs that are jointly produced with agricultural products. The true IDF is approximated by a flexible translog functional form estimated using a full information maximum likelihood method. Technical and environmental efficiencies are disaggregated across farms and account for spatial variations. Our results show that there is a significant correlation between the two efficiencies. The IDF is used to compute the cumulative Malmquist productivity index and the Fisher index. The two indices are used to measure changes in technology, profitability, efficiency and productivity in response to the adoption of two selected Best Management Practices (BMPs) whose objective is to reduce water pollution. We found significant differences across BMPs regarding the direction and the magnitude of their effect.