Technical and environmental efficiency of agriculture sector in South Asia: a stochastic frontier analysis approach

Abstract

The purpose of this study was to measure and assess comparative study of technical and environmental efficiency of agriculture sector in South Asia using balanced panel data for the period 2002–2016. The translog stochastic frontier analysis approach was applied to estimate output-oriented technical efficiency and input-oriented environmental efficiency. Results of translog production model give that output elasticity w.r.t. land, labor, capital and fertilizer is 2.13, 1.26, 0.01 and 0.17, respectively. Log likelihood test shows that there is technical inefficiency in the agriculture sector of South Asian countries. The average value of output-oriented technical efficiency for South Asian countries was 0.92 ranging from 0.82 to 0.97. This suggests that agricultural production of South Asian region could be increased up to 8 percent by eliminating the effects of technical inefficiency. Moreover, the findings show that Sri Lanka is the most technically efficient country having efficiency 0.99 followed by India (0.98), Bhutan (0.93), Bangladesh (0.89), Nepal (0.88) and Pakistan (0.85). The results of input-oriented environmental efficiency score of South Asia were 0.77 ranging from 0.57 to 0.97. This shows that there is opportunity to enhance environmental efficiency of South Asian countries by 23%. Sri Lanka achieved the highest environmental efficiency (0.97) followed by India (0.96), Bhutan (0.72), Bangladesh (0.71), Pakistan (0.67) and Nepal (0.57). It is recommended that there must be collaboration among the South Asian countries in research and development especially in agriculture sector on priority bases.