Decomposition of Total Factor Productivity Change in the
U.S. Hog Industry, 1992-2004
Nigel Key, William McBride, and Roberto Mosheim*
Paper prepared for presentation at the Annual Meeting of the AAEA,
Long Beach, California, July 24-26, 2006.
Abstract. There have been dramatic structural changes in the U.S. hog industry in the last two
decades that have coincided with substantial increases in farm productivity. This study used a
stochastic frontier analysis to measure TFP growth between 1992 and 2004 and to decompose
the TFP growth into four components: technical change and changes in technical efficiency,
scale efficiency, and allocative efficiency. The study finds that productivity gains in the twelve
year study period are explained almost entirely by technical progress and by improvements in
scale efficiency. The study also disaggregates TFP growth in the Southeast and Heartland to
better understand the implications of large spatial shifts in production. Results indicate that
regional differences in TFP growth in the 1992-1998 and 1998-2004 periods can be explained
primarily by changes in scale of production. Results indicate that despite large increases in the
scale of production, there remains substantial scope for further scale efficiency gains, particularly
in the Heartland where farms operate at a smaller average scale compared to in the Southeast.
Key words: total factor productivity growth, stochastic frontier, technical change, scale efficiency
*Economic Research Service, U.S. Department of Agriculture. The views expressed are those of the
authors and do not necessarily correspond to the views or policies of ERS, or the U.S. Department of
Agriculture. Direct correspondence to: Nigel Key, email@example.com, (202) 694-5567.
In the last 15 years there have been pronounced structural changes in the U.S. hog sector. Since
1994, production has shifted to larger operations and