Based on a theoretical microeconomic model, we econometrically estimate investment utilization, adjustment costs, and technical efficiency in Danish pig farms based on a large unbalanced panel dataset. As our theoretical model indicates that adjustment costs are caused both by increased inputs and by reduced outputs, we estimate hyperbolic distance functions that account for reduced technical efficiency both in terms of increased inputs and reduced outputs. We estimate these hyperbolic distance functions as “efficiency effect frontiers” with the Translog functional form and a dynamic specification of investment activities by the maximum likelihood method so that we can estimate the adjustment costs that occur in the year of the investment and the three following years. Our results show that investments are associated with significant adjustment costs, especially in the year in which the investment was made. The highest investment utilization is two years after the investment.
Symposium I Anvendt Statistik 2014, 2014, p. 42-51