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Abstract

The purpose of this paper is to analyze the cost efficiency of dairy farms in Japan. The overall cost efficiency measure is decomposed into two components (Fare and Grosskopf, 1985): (1) the weak cost efficiency measure; (2) the scale efficiency measure. Linear programming techniques are used in calculating the efficiency measures for a sample of dairy farms in Japan during the year 1989. The study demonstrates an overall cost inefficiency, which is not due to scale inefficiency, but rather to weak cost inefficiency.

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