Stochastic Frontier Estimation of Economic Efficiency of Small and Medium Scale Feed Processing Enterprises in Imo State, Nigeria; Using Translog Profit Function Model.

Abstract

Feed constitutes 70% of operating cost in livestock business in Nigeria. But the quality of the products from processing is very low. The method is very tedious resulting perhaps from inefficient use of technique and low management at enterprise level. To investigate in to the fact, the study was conducted at enterprises level in two Agricultural Zones in Imo State with a sample of 80 each of small and medium scale enterprises to ascertain the level of economic efficiency and determinants of economic efficiency using stochastic translog profit function. The result shows that both small and medium scale enterprises were not efficient. There was no significant difference in mean efficiency between the small and medium scale enterprises. The determinants of economic efficiency result shows that business experience, credit status and labour influenced efficiency for small scale enterprise while membership to cooperative organization, business experience, credit status and labour influenced efficiency in medium scale enterprise respectively. . The study observed that there was an opportunity for increase in enterprises’ efficiency and concluded that policies that would directly affect these identified variables should be pursued vigorously.

Key words: stochastic frontier, economic efficiency, translog, profit function, small and medium scale, feed processing, enterprise, Imo State, Nigeria, profit function