Technical Efficiency and Economies of Scale for Partnership- Based of Virginia Tobacco Farming in Buleleng, Bali, Indonesia: A Non-parametric Approach

Abstract

In operating their farms, Virginia tobacco farmers establish partnerships with a number of companies, such as Company GG and Company BB. The level of tobacco production efficiency obtained is considered to be dependent on the experiences of the partner companies. This study aims to analyze the technical efficiency and the economies of scale of Virginia tobacco farming in Buleleng regency, Bali. Employing a survey method, census was conducted on a total of 87 respondents. Data was analyzed using a non-parametric approach, with a data envelopment analysis (DEA) model. Results show that based on planting location and acreage, the technical efficiency of Company GG partners is relatively higher than that of Company BB. The efficiency scale (SE = 1) revealed that farmers participating under the Company GG partnership is relatively more efficient compared to Company BB farmers. Further, the economies of scale score based on planting location show that the majority of Company GG farmers experience constant return to scale (CRS) category, while most Company BB farmers fall under the decreasing return to scale (DRC) category. A slightly different result is displayed by the economies of scale analysis based on acreage, where the majority of Company GG farmers with up to 4 ha of planting area is under the increasing return to scale (IRS), while farmers with >4 ha to 6 ha of planting area is under the decreasing return to scale (DRS) category. For Company BB farmers with up to 2 ha of planting area, 50% are experiencing constant return to scale (CRS) and 50% are experiencing increasing return to scale (IRS). Meanwhile, those who have >2 ha up to 6 ha, fall under the decreasing return to scale (DRS) category.

Keywords: efficiency, Virginia tobacco, partnership, data envelopment analysis, Bali