A Test for Relative Efficiency of Farmers Cultivating Groundnut in Tamil Nadu: A Profit Function Approach

Abstract

The term 'Efficiency' refers to the ability of the farmers to make optimal decisions with regard to resource use. Economic efficiency comprises of both allocative and technical efficiencies. The relative economic efficiency may arise due to the differences in technical and/or allocative efficiency by comparing two or more farms. In the present paper, an attempt is made to analyze and compare the relative economic efficiency of small and large farmers cultivating groundnut. The model developed by Lau and Yotopoulous has been used to measure and compare relative economic efficiency with its components - technical and allocative efficiency. It may be concluded that the test of relative economic efficiency of farmers cultivating groundnut is in favour of the small farmers. It is also inferred from the analysis that the small farmers attain higher levels of price efficiency, and they also operate at higher technical efficiency.