Abstract
This study analyzed the production efficiency of paddy farms in Northern Sri Lanka using the Data Envelopment Analysis approach (DEA). Farm efficiency has been related to resource use efficiency and achievement of higher productivity. The aim of this study was to study the levels of production efficiency of small paddy farms, and to identify the impacts of land size and extension worker contacts on production efficiency. A total of 120 farmers were randomly selected in the Mannar district in Northern Sri Lanka. The DEA technique was used to measure technical/production efficiency and results were compared for land size and extension contact category of farmers. It was found that more than average of farms had low efficiency scores of below 0.5. Small farms and large farms had a significant difference in efficiency scores. Thus this indicates that there is an impact of land size on farm production efficiency and very small farms and also large farms are inefficient in paddy production the area. There was a significant difference in farm efficiency between farmers with extension contacts and otherwise. The study reinforced the role that can be played by extension workers in pushing the farm efficiency levels higher and helping in better resource use efficiency on farms.
Highlights
Production efficiency is an approach to ensure that products of firms are produced in the most profitable manner
Farms of moderate land size were found to be more efficient in production compared to small farms (15 acres). This indicates that there is an impact of land size on farm efficiency and very small farms and large farms are inefficient in paddy production the area
Small farms and large farms had a significant difference in efficiency scores
Summary
Production efficiency is an approach to ensure that products of firms are produced in the most profitable manner. The most popular techniques used to measure farm efficiency are the Data Envelopment Analysis (DEA) (Charnes et al 1978) and the Stochastic Frontier Analysis (SFA) (Aigner et al 1977; Meeusen and van den Broeck, 1977). The former uses mathematical linear programming methods, whereas the latter uses econometric methods. The DEA approach does not require any specific functional form to be selected, neither are any behavioural assumptions needed as long as allocative efficiency is not considered. The DEA efficiency scores are likely to be sensitive to measurements errors and random errors (Coelli et al, 2002)
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