The role of hired labour on technical efficiency in an expanding dairy sector: The case of Ireland

Abstract

AbstractThe 2015 EU milk quota abolition initiated considerable expansion in the dairy sector. This expansion has increased the demand for additional labour in some EU countries, most significantly in Ireland. This paper explores the role of hired labour on Irish dairy farms' technical efficiency (TE). We use a detailed farm‐level panel data set of a representative sample from 2000 to 2018. To estimate transient, persistent, and overall TE over time, we apply a 4‐component stochastic frontier model. Our findings show significant variation in TE scores over the period. We also control for endogeneity to obtain marginal effects of hired labour on TE. The results reveal that hired labour has a significant yet small, positive effect on farms' TE. Our findings suggest that the effect of hired labour on TE is larger for small and medium‐sized farms. This effect is larger when herd size increases.