Using stochastic profit frontier analysis to construct typologies of rural micro-regions

The stochastic frontier approach provides an ideal framework to build the typology of rural micro-regions. Conceptually, the stochastic approach is developed from a theory of producer behavior in which the motivation is the standard optimization criteria (minimize costs or maximize profits), but in which success is not guaranteed. The associated estimation procedures allow for failures in efforts to optimize and for differing degrees of success between producers. This allows for the analysis of the determinants of variation in the efficiency with which producers pursue their objectives…

Torero, Maximo
Maruyama, Eduardo
Martins-Filho, Carlos
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International Food Policy Research Institute (IFPRI)
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