Abstract
Technical inefficiency persists in Ghana’s cocoa farms. Farm-level guidelines from empirical studies are essential to inform programmes dealing with this challenge and subsequently improves farmers’ welfare. This study evaluates the two-way effects of technical efficiency and welfare using Data Envelopment Analysis (DEA) and Conditional Mixed-process (CMP). The study reveals that, with no additional inputs, farmers have the potential of increasing their output by an average of 56% (overall technical efficiency) with mean pure technical and scale efficiencies estimated at 76% and 58%, respectively. Observed inefficiency in the Ghanaian cocoa farms is due to both inefficient utilization of inputs and farmers’ inability to operate at the most productive scale size. Furthermore, findings from the study indicated that improved technical efficiency and welfare of smallholder cocoa farmers are crucial for the sustainable growth of Ghana’s cocoa sector as farmers’ efficiency and welfare significantly complement each other. In other words, improved welfare enhances technical efficiency, and higher technical efficiency score translates into better welfare. Hence, farm-level policies such as inputs subsidy programmes, training farmers on the proper application of agrochemicals, among others to enhance farm efficiency should be strengthened since efficiency is tied to household welfare. Moreover, investment in education targeted at farmers to improve their managerial and technical capacities will enhance their ability to optimize the operational size of the cocoa production system, and subsequently improve their welfare.
Highlights
From the time cocoa cultivation was introduced as a farming business in 1897 in Ghana, the crop has been an essential source of livelihood for most of the rural folks in the southern part of the country
Building on the previous studies, this study examines the relationship between farm-level technical efficiency and farmers’ welfare
5 Conclusions and recommendations This study endeavors to evaluate the extent of technical efficiency and the two-way effects of farm-level efficiency and welfare of smallholder cocoa farmers in Ghana
Summary
From the time cocoa cultivation was introduced as a farming business in 1897 in Ghana, the crop has been an essential source of livelihood for most of the rural folks in the southern part of the country. With fluctuating output levels and low yields, the efficiency of resource use has become a significant area of study in Africa’s cocoa industry, in order to increase productivity and improve farmers’ welfare in a sustainable manner. DEA has been used in agricultural production sectors following the pioneer works of De Koeijer et al (2002) and Reig-Martınez and Picazo-Tadeo (2004) This was motivated by the heterogeneity of smallholder farmers, in developing countries, who are less likely to exhibit a uniform production function rendering stochastic frontier technique of estimating efficiency less appropriate. In this vein, the study used DEA to generate technical efficiency index for smallholder cocoa farmers in Ghana. Farmers are managing approximately 2 plots and had their farms sprayed about 5 times with pesticides per cocoa season. A farmer received an average of 2 extension services in the last cocoa season
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