Economic Efficiency Soybean Production: The Case of Smallholder Farmers in Pawe Woreda, Ethiopia: Parametric Approach

Abstract

This study was initiated with the objective of assessing economic efficiency of soybean production. A multistage sampling technique was employed to select 203 soybean farm households randomly from Pawe Woreda, Metekel zone, Benishangul-Gumuz Regional State, Ethiopia. Parametric stochastic production frontier approach was used to estimate technical, allocative and economic efficiency levels, whereas Tobit model was used to identify factors affecting economic efficiency. The mean technical, allocative and economic efficiencies were 72.72%, 35.378% and 25.05%, respectively, indicating there was significant amount of economic inefficiency in production. The Tobit model result showed that important factors that affected technical, allocative and economic efficiency are age, level of education, extension service, access for credit, farming experience, off/non-farm income participation and training. Based on the findings the following recommendations are forwarded. Government should devote a great effort on a reduction in the interest rate, bureaucracies and collaterals of banks on loans which will facilitate credit accessibility to smallholder farmers, strengthening and establishing both formal and informal type of framers education and strengthen the existing agricultural extension system.

Keywords: Pawe woreda, soybean, efficiency, Cobb-Douglas, Tobit

DOI: 10.7176/JESD/12-15-01

Publication date:August 31^st 2021