Technical Efficiency of Paddy Farming in the East Coast of Peninsular Malaysia: A Comparison Based on DEA and SFA

Abstract

The KADA and IADA KETARA are among important granary areas in Peninsular Malaysia producing paddy for domestic consumption. Both granaries are located in the East Coast of Peninsular Malaysia and involved with the new paddy scheme introduced by the Malaysian Government in 2008 during the world food crisis. This research was conducted to determine the best granary area in terms of technical efficiency (TE) based on two methods; Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA). The study involved interviewing with 148 paddy farmers using open and close ended questionnaires and the respondents were randomly chosen. The results showed that based on DEA indicator, IADA KETARA recorded the highest TE which is 0.90 while KADA obtained only 0.61. Based on SFA indicator, IADA KETARA indicated 0.84 TE while KADA, 0.67. The results consistently showed the TE scores estimated under DEA (TE-vrs) and SFA methodologies for IADA KETARA is greater than KADA and they are statistically significant at 5% level in both areas. Thus, it can be concluded that IADA KETARA are the best managed paddy farms in terms of technical efficiency compared to KADA.

Keywords: Technical efficiency, paddy granary areas, Data Envelopment Analysis, Stochastic Frontier Analysis