Determinants of Inefficiency in Norwegian Salmon Aquaculture

This article builds on the literature investigating productivity and efficiency in the Norwegian salmon farming industry. The objective of this article is to investigate the determinants of inefficiency. We use a stochastic frontier approach that allows the estimation of a production function and an inefficiency function. The sources of inefficiency can be separated into temporary shocks and factors that lead to permanent efficiency differences. The results indicate an improvement in technical efficiency over time. This improvement can partly be explained by a restructuring of the industry, with firms becoming bigger and more specialized, as well as by improvements in government regulations. The inefficiency that is still present is mainly the result of temporary shocks. Disease outbreaks seem to be the most important of these temporary shocks, as disease problems lead to early harvesting or destruction of the fish and thereby, obviously, increase inefficiency.