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
Highlights
Agriculture is crucial in achieving global poverty reduction targets and especially in the lowest income countries, still it is the single most important productive sector
This study focused on both the use of available resources and socio-economic factors affecting allocative efficiency of maize production
The result of the analysis Indicated that individual farm level allocative efficiency was about 65%
Summary
Agriculture is crucial in achieving global poverty reduction targets and especially in the lowest income countries, still it is the single most important productive sector. Especially in sub-Saharan Africa, large majorities of the population live in rural areas and deserve their livelihoods primarily on agriculture (Gollin, 2009). To enhance broad-based poverty reduction and to ensure food security in Africa, great investment must be made on smallholder farmers. Agriculture in Ethiopia is the base of the country’s economy, accounting for half of GDP, 83.9% of exports, and 80% of total employment. Production is highly subsistence in nature and most of the commodity exports are provided by smallholder farmer. Exports are almost completely agricultural commodities, and coffee is the largest foreign exchange earner. As a sub-Saharan country, Ethiopia has the fifth largest area devoted to maize, but is second, only to South Africa, in yield and third, after South Africa and Nigeria, in production. As a sub-Saharan country, Ethiopia has the fifth largest area devoted to maize, but is second, only to South Africa, in yield and third, after South Africa and Nigeria, in production. (Abate et al, 2015)
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