Estimating cost efficiency and sources of inefficiency in paddy farming: A study in Vietnam’s Mekong Delta

Abstract

The misuse of chemical fertilizers, pesticides and herbicides in rice cultivation is leading to low-quality outputs, high production costs, health issues and environmental problems (e.g., degraded soil quality, water pollution and increasing greenhouse gases). The efficient use of production inputs would be a feasible way to mitigate these issues. This paper employed a true random-effects model to measure cost efficiency and investigate the factors affecting cost inefficiency among Vietnamese rice producers. This study used the surveyed data of 350 rice households collected in the Mekong Delta, Vietnam. The findings of this research show that the mean cost efficiency score is 0.92 with a wide variation (0.26 – 0.99). This study indicates that there is still potential for inefficient rice producers to save production costs by improving their cost inefficiency. The study also reveals a positive relationship between cost inefficiency and farm size, natural disasters and rice diseases. This suggests that as farms grow, natural disasters and rice diseases become more prevalent and rice producers become increasingly incapable of managing input costs. This study suggests that supportive policies should focus on improving rice farmers’ skills to manage production inputs and deal with rice diseases and natural disasters to minimize rice production costs.