Technical efficiency estimates of stochastic production frontier model using Rayleigh distribution

Abstract

The present study is attempted to estimate the Technical Efficiency level of paddy farmers in Thiruvarur District of Tamil Nadu, India using Stochastic Production Frontier Model to know the variations in efficiency among the farmers and to analyse the policy making decisions for improving the efficiency. A Cobb-Douglas Production function was considered in which the technical inefficiency effects are defined by a model with Rayleigh distribution. Primary data from 300 households in Thiruvarur district during the year 2015-16, Tamil Nadu were used. The results show that the Technical Efficiency of paddy farmers in the study area ranged from 11 to 85 percent with an average of 55 percent. The average Technical Efficiency level implied 55 percent of the farmers in the study area realised their technical abilities. Based on the technical efficiency score, the average potential to increase the paddy production was 35 percent and if the minimum efficiency farmer can reach the maximum level then the cost can save up to 87 percent. The MLE result shows that Farm Yard Manure and Chemical fertilizers are positively related to the Technical Efficiency. The socio economic factors influencing Technical Efficiency was identified using linear regression model and the result shows that sex of the farmer, education and credit are the important factors to increase the Technical Efficiency.