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This paper examines the diversification economies and the impact of the degree of crop diversification on the technical efficiency of multi-output production system, using farm-level panel data from the period 2008 to 2012. Measurements are obtained from the estimation of a stochastic multi-output input distance function. This study corrects for sample selection bias in the context of a translog functional form that appears when some farms produce only two outputs. The empirical results indicate that diversification economies are found to exist in the efficient small farms. However, greater diversification lead to lower technical efficiency. |
