A Parametric Approach to Estimating Eco-Efficiency

The concept of eco-efficiency is becoming increasingly popular as a tool to capture economic and environmental aspects of agricultural production. The literature to date has exclusively used the Data Envelopment Analysis (DEA) approach to measure producers' eco-efficiency. We show that it can also be estimated using a Stochastic Frontier Analysis (SFA) approach. Our approach not only allows controlling for random noise in the data but also permits an analysis of the potential substitutability between environmental pressures. We provide an empirical application of our model to data on a sample of Spanish dairy farms.