Dealing with endogeneity in risk analysis within the stochastic frontier approach in agricultural economics: A scoping review

Abstract

Literature on farm productivity and efficiency was reviewed using a scoping review methodology, focusing on studies that have included risk and risk management tools within the stochastic frontier analysis in agricultural economics. This study contributes to investigating the methods used to account for endogeneity by using a risk-accommodating stochastic frontier approach when analysing farmers’ performance. Despite the increasing methodologies proposed in the literature, only a few studies have treated endogeneity in farm risk-performance evaluations. According to our findings, it can be concluded that there is a literature gap regarding the adoption of a comprehensive approach capable of dealing with endogeneity when assessing farm performances. Endogeneity and risk issues need to be concurrently addressed to make strides in achieving economic and environmental sustainability. Neglecting endogeneity in these analyses may lead to biased estimates and thus inappropriate policy recommendations failing to boost the productivity and technical efficiency of farmers.