The Impact of Government Institutions on Dairy Farm Efficiency: the Case of Ontario and New York Dairy Farms

Abstract

The impact of supply management on dairy farm efficiency in Canada is of increasing academic and public interest. This thesis decomposes the cost efficiency of Ontario and New York dairy farms into its technical and allocative components. Triangulating between linear programming and econometric techniques, we find New York farms to be more cost efficient than Ontario farms, with allocative efficiency accounting for the majority of this difference. The difference in inefficiency is in large part caused by the overcapitalization of Ontario farms, as well as their reliance on homegrown feed. We argue that the system of supply management could theoretically be at the root of this inefficiency.