Technical Efficiency of Agricultural Production in Ethiopia

T Yohannis

doi:10.7176/jnsr/10-5-05

Abstract

Farmers faced low productivity due to lack of knowledge on maximizing level of output at the given level of inputs. Technical efficiency of agricultural production in the Ethiopia were assessed by using cross-sectional secondary data collected from Ethiopia socioeconomic survey in 2015/16 production year. Cobb-Douglas stochastic frontier production function model was used to estimate technology and determinants of technical inefficiency simultaneously using the maximum likelihood estimator (MLN). MLN estimation results showed that increasing input use like area, seed, oxen, fertilizer and labor would increase yield of agricultural production. The coefficients of elasticity for area, seed, oxen, fertilizer and labor were 0.21, 0.29, 0.38, 0.12 and 0.10 respectively. Consequently, agricultural production exhibits increasing return to scale because the sums of input elasticity’s were greater than one which is 1.1. The mean technical efficiency of farmers in the agricultural production was about 36%. The implication is that there is an opportunity to increase output on average by 64% through efficient use of inputs given the current input use and technology. The discrepancy ratio gamma (γ) which measures the relative deviation of output from the frontier due to inefficiency was about 86 percent indicating that about 86% of variation in agricultural production among the farmers was attributed to technical inefficiency effects. Thus, it is possible to improve technical efficiency through better use of these factors. Keywords: Technical efficiency, Cobb-Douglas stochastic frontier and Smallholders. DOI: 10.7176/JNSR/10-5-05 Publication date: March 31 st 2020

Highlights

IntroductionEthiopia is an agrarian country where about 43% of GDP and 85% of total employment is agriculture based (MoARD, 2010)
In spite of its great importance to the country’s economy, agricultural productions are subsistencebased and dominated by smallholder farm households that operate on farms of less than one hectare (GebreSelassie, 2004)
The SFA is more appropriate than convectional production function because it includes inefficiency

Summary

Introduction

Ethiopia is an agrarian country where about 43% of GDP and 85% of total employment is agriculture based (MoARD, 2010). About 60% of agricultural GDP is derived from crop production whereas livestock and account 27%, and other areas contribute 13% of the total agricultural value added. The sector is dominated by small-scale farmers who practice rain-fed mixed farming by employing traditional technology, adopting a low input and low output production system., respectively (Gebre-Selassie and Bekele, 2013). In spite of its great importance to the country’s economy, agricultural productions are subsistencebased and dominated by smallholder farm households that operate on farms of less than one hectare (GebreSelassie, 2004). Smallholder farming represents for about 90 percent of agricultural outputs and 95 percent of land area under crop production. About 98 percent of coffee, the country’s leading cash crop and 94 percent of food crops are produced by smallholders, while only 2 percent of coffee and 6 percent of crop production are produced by private and state commercial farms

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