Determinants of Technical Efficiency of Rose Cut-Flower Industries in Oromia Region, Ethiopia

Abstract

The objective of this study is to measure and identify input use efficiency level of 28  rose cut flower industries in three districts of Oromia Regional state (Ethiopia) using a two stage approach. . In the first stage, a non-parametric (DEA) method was used to determine the relative technical, scale and overall technical efficiencies. In the second stage, a Tobit model was used to identify sources of efficiency differentials among industries. The results obtained indicated that the mean technical, scale and overall technical efficiency indices were estimated to be 92%, %61 and 58%, respectively for the cut flower industries. This Implies, major source of overall technical inefficiencies was scale of operation rather than pure technical inefficiency. Besides, the estimated measures of technical efficiency were positively related with Farming experience, formal schooling years of manager’s and negatively related with age of farms. No conclusive result was obtained for the relation between size and efficiency.

Key words: Technical Efficiency, Scale Efficiency, DEA, Tobit, Rose cut flowers, farming experience, Oromia, Ethiopia.