Production and Cost Efficiency Analysis Using Frontier Stochastic Approach, A Case on Paddy Farming System With Integrated Plant and Resource Management (IPRM) Approach In Buru District Maluku Province Indonesia

Abstract

The purpose of this study was to determine the level of production and cost efficiency on paddy farming system with integrated plant and resource management (IPRM) approach in Buru District Maluku Province. Maximum Likelihood Estimation (MLE) method was used to estimate parameters in both frontier stochastic models. 120 respondents was determined by using simple random sampling method. The empirical finding shows that the varies of the error term in both models are mostly influence by inefficiency factors (g production= 0.933; g cost = 0.948) rather than stochastic factors. The average technical efficiency is 0.855 and 75.83% respondent already operates in this level of efficiency. The average cost efficiency is 0.86 and 80% of respondent already achieve this level of cost efficiency. These findings indicate that rice farming system with integrated plant and resource management approach in the research area are efficient and profitable.

Keyword: Rice, Production efficiency, Cost efficiency, IPRM approach, Indonesia, Stochastic frontier