Economic Efficiency of Smallholder Farmers in Maize Production in Bako Tibe District, Ethiopia

Abstract

Ethiopian agriculture is characterized by low productivity due to technical and socio-economic factors. To improve this problem integration of modern technologies with improved level of efficiency become more crucial. Accordingly, this study was conducted using Stochastic Frontier Production Function (SFPF) to estimate the level of Technical Efficiency (TE), Allocative Efficiency (AE) and Economic Efficiency (EE) as well as Tobit model to identify factors affecting these efficiencies. The mean of TE, AE and EE were 82.93%, 66.03% and 54%, respectively. The mean of TE and AE implies that there exists possibility to increase production by 17.07% without using extra inputs and decrease cost of inputs by 33.97%, respectively. The result revealed high inefficiency among maize producers. The Tobit model results revealed that age, off/non-farm activities, sex, amount of land owned and perception on agricultural policy had a significant effect on TE. Education, frequency of extension visit, perception on agricultural policy and livestock holding had significant effect on AE while age, off/non-farm activities, sex, land owned, credit utilized and perception on agricultural policy had a significant effect on EE. The result showed that there are opportunities to increase efficiency of maize production. Therefore, the policies and strategies in development and research may act on these variables to increase the efficiency level of maize producers.

Keywords: Cobb-Douglas, efficiency, maize, smallholders, stochastic frontier, Tobit