Robust Productivity Analysis: An application to German FADN data

Abstract

Sources of bias in empirical studies can be separated in those coming from the modelling domain (e.g. multicollinearity) and those coming from outliers. We propose a two-step approach to counter both issues. First, by decontaminating data with a multivariate outlier detection procedure and second, by consistently estimating parameters of the production function. We apply this approach to a panel of German field crop data. Results show that the decontamination procedure detects multivariate outliers. In general, multivariate outlier control delivers more reasonable results with a higher precision in the estimation of some parameters and seems to mitigate the effects of multicollinearity.