Abstract
This paper analyses the influence of the level of technical inefficiency that occur in farmers on profits earned. Where the level of technical inefficiency consider that factor of managerial capabilities of farmers, one of which is a farmer's behaviour in dealing with the risks of farming. The aims of this research are to analyse the influence of the level of technical inefficiency on profits and perform simulations to determine the strategic policies that can be done by the government for an increase in profits of rice farmers. The methods used are the method of Translog Stochastic Profit Frontier and share of expenditure for inputs against profit. Primary data by panel collected during the rainy season and the dry season in 2014/2015 with the number of observations for 610 farmers. The research area covers 7 subdistricts in Malang Regency, East Java Province, Indonesia. The results showed that there is influence negatively the level of technical inefficiency and significant with a profit of 2.61. The best policy is the provision of a hand tractor to farmer group and efforts to reduce the level of technical inefficiency through increasing attitudes and behaviour of farmers in dealing with the risks of farming with the changes increase in profit of 29.12%.
Highlights
The stability of food supply is essential, if there is a deficit of stocks of foodstuffs would suck up the foreign exchange sizeable
East Java Province is the second largest producer of rice in Indonesia, but a fixed value in 2013 as many as 12.05 million tons of rice dry milling, decreased by 149 260 tonnes or about -1.22% compared to the year 2012, this was due to a decrease in productivity of 2.29 quintal / hectare or about -4.20%, the harvested area increased by 3.1%
Translog profit function that takes into account the level of technical inefficiency is estimated using SUR which requires a two-stage estimation, namely the first stage, residual OLS is used to estimate the cross-equation error covariances, The second stage is estimated through regression parameter using the generalized least squares estimation of covariance
Summary
The stability of food supply is essential, if there is a deficit of stocks of foodstuffs would suck up the foreign exchange sizeable. East Java Province is the second largest producer of rice in Indonesia, but a fixed value in 2013 as many as 12.05 million tons of rice dry milling, decreased by 149 260 tonnes or about -1.22% compared to the year 2012, this was due to a decrease in productivity of 2.29 quintal / hectare or about -4.20%, the harvested area increased by 3.1%. In 2010 in Malang Regency with a population of 2,413,779, the rice the needs of 306,549 tonnes and total production of 263,162 tonnes (Statistics Indonesia of East Java Province, 2013) or from different sources the number of rice production of 284,833 (Agriculture Agency of Malang Regency, 2011) resulting in a shortage of 43 387 tonnes or 21 716 tonnes. Rice farmers in Malang regency achieve technical efficiency of 76.5% (Agustina Shinta2, 2006) so there is still a chance to increase the maximum production of 23.5%, or called there is still technical efficiency. Translog profit function models in this research will insert technical inefficiency of variables explicitly, while the farmer's behaviour in the face of risk has been implicitly included in the calculation of inefficiency because it is a managerial capability of farmers
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