Analysis of Factors Affecting the Allocative Efficiency of Maize Production: In Case of Nunu Kumba Woreda, East Wollega Zone

Abstract

Allocative efficiency is one of the most important measures of firm profitability. Hence, this study was aimed to examine the efficient utilization of existing resources and identify the effect of socio-economic and institutional factors on the allocative efficiency of maize production. The multi-stage sampling procedure was applied to the population of maize farmers from the area under study and 330 respondents were proportionally selected from four kebeles of the study area. A Stochastic production frontier model was used to estimate economic and technical efficiency score which used to drive allocative efficiency score, while Tobit model was used to identify factors affecting allocative efficiency score. The result of the study shows that allocative efficiency score was 79.49 with a minimum of 47.23%, and a maximum of 94.4. The  Tobit model estimation result revealed that Allocative efficiency was positively and significantly affected by education, farm size, livestock holding, and market distance, while negatively and significantly affected by sex, age, family size, off-farm income, and credit utilization. Accordingly, the study recommended the need to supply enough amounts of improved seed and fertilizer on time to increase maize productivity. It also suggested the need for policy to encourage farmers’ education, easily available and affordable credit services on time, increase the provision of extension service as well as give training for farmers on correct input application and improved farm technologies to improve the production efficiency of maize farms.

Keywords: Allocative Efficiency, SFA, Tobit, Cobb-Douglas

DOI: 10.7176/JNSR/9-23-05

Publication date: December 31^st 2019