Economic Efficiency of Smallholder Farmers in Teff Production: The Case of Enemay District, East Gojjam Zone, Amhara Region, Ethiopia

Abstract

Agriculture remains to be the most important sector of the Ethiopian economy and teff is one of the dominant crops which is produced at less efficient level in the study area. This means that it is possible to obtain additional output from existing inputs used, if resource are properly used and efficiently allocated. The aim of this study was to assess the economic efficiency of smallholder teff producers and identify factors affecting efficiency of smallholder farmers in teff production of Enemay District, Amhara Regional State of Ethiopia. A two-stage sampling technique was employed to select 197 sample farmers who were interviewed using a structured schedule to obtain data pertaining to teff production during 2018/2019 production season. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical, allocative and economic efficiency levels, whereas Tobit model was used to identify factors affecting efficiency levels of the sample farmers. The estimated results showed that the mean technical, allocative and economic efficiencies were 81%, 11% and 9%, respectively which indicates the significant inefficiency in teff production in the study area. Among factors hypothesized to determine the level of efficiencies, education, soil fertility, credit and teff production experience were the positively significant determinants of technical and economic efficiencies of teff producing farmers; while frequency of extension contact had a positive relationship with technical efficiency. In addition, cultivated land determined farmers’ technical, allocative and economic efficiencies negatively and significantly. Whereas distance to market determined technical and economic efficiencies negatively. The result indicated that there is a room to increase the efficiency of teff producers in the study area. Hence, emphasis should be given to improve the efficiency level of those less efficient farmers by adopting the practices of relatively efficient farmers in the area. Beside this, policies and strategies of the government should be directed towards the above mentioned determinants.

Keywords: Teff, efficiency, Cobb-Douglas, Stochastic frontier, Tobit

DOI: 10.7176/JAAS/68-04

Publication date:September 30^th 2020