Assessing the impact of economic liberalization across countries: a comparison of dairy industry efficiency in Canada and the USA

This paper examines and compares the technical efficiency measures of Ontario and New York dairy producers for the period 1992 to 1998. A nonparametric stochastic frontier model is introduced to estimate technical efficiency. The backfitting algorithm of Breiman and Friedman is used to estimate the frontier. Empirical results indicate that during the period of study, New York dairy farmers produced milk more efficiently than Ontario dairy producers, but the magnitude of the difference was small. The estimated mean technical efficiency for the former group is 0.602 as compared to 0.532 for the latter. The results also indicated that over time, dairy farms in both regions improved their level of technical efficiency. Furthermore, no correlation was found between farm size and estimated technical efficiency.