Labour input and economic efficiency of Irish dairy farms
Garcia-Covarrubias, Luis
Garcia-Covarrubias, Luis
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Publication Date
2023-06-19
Type
Thesis
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Abstract
The EU milk quota abolition initiated considerable restructuring in the EU dairy sector. Ireland is one of the countries that experienced significant growth, which has led to changes in farm labour demand. This PhD thesis aims to assess the role of family and hired labour, and automation in enhancing the efficiency of farms in an evolving dairy sector. Based on farm-level panel data sets from 2000 to 2019, and a cross-section supplementary data in 2018, the thesis presents three analyses of farm labour and productivity on Irish dairy farms. The first analysis explores the effect of hired labour on farms' technical efficiency (TE). Using a state-of-the-art stochastic frontier model that controls for endogeneity between inputs and TE, the findings reveal that hired labour positively affects farms' TE, improving dairy production. The findings suggest that the positive effect of hired labour on TE is marginally higher for smaller farms. The second analysis examines the role of automation in the efficiency of Irish dairy farms. A latent class stochastic frontier model is used to jointly estimate TE scores and identify two latent classes of farms utilising different technologies in their production, i.e., smaller, less intensive, and larger, more intensive farms. The results show that automated technologies (i.e., automatic parlour feeders, cluster removers, and scrapers) have heterogeneous effects on farms TE. Specifically, automated cluster removers and scrapers are correlated with higher TE scores in the smaller, less-intensive farms. Automated parlour feeders positively correlate to the TE of the larger-more-intensive farms. The third analysis focuses on estimating the shadow wage of family labour and assesses its role in the demand for hired labour on the farm. A two-step structural production function approach is used to estimate unpaid family labour shadow wage, and a semi-parametric censored dependent variable data model is applied to explore the role of shadow wages on hired labour demand. The findings show that as the size of the farm increase, so does the family labour shadow wage. Moreover, the results indicate positive returns to farmers' formal agricultural education. Finally, findings suggest a substitution and income effect of shadow wages in demand for hired labour— the substitution effect is larger for the demand of casual hired labour. Overall, this thesis provides an improved understanding of farm labour and its link with automation and efficiency as crucial factors for the sustainable development of an evolving dairy sector.
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NUI Galway