The technical efficiency of large-scale agricultural investment in Northwest Ethiopia: A stochastic frontier approach

Abstract

This study endeavoured to measure the technical efficiency of large-scale agricultural investment in Northwest Ethiopia. Besides, it strives to fathom the socioeconomic attributes and farm management techniques that influence technical inefficiency. This study uses the stochastic frontier approach to estimate the technical efficiency based on the cross-section data of 200 investors selected through a multiple-stage random sampling technique. The study established that better utilization of capital, labour, land, and seed inputs was reflected positively (albeit proportionally less) in grain output; however, the influence of agrochemical inputs was negative. The study highlighted the positive role of gender and level of education in improving technical efficiency, whereas on the other hand, age, occupation, district, and subsidies contributed to technical inefficiency. The study found that the overall mean technical efficiency for the study area was 71.7%, meaning that producers produce grain at a loss of around 28.3% due to technical inefficiency. As a result, it might be said that producers use their technology and resources somewhat inefficiently. The outcome of the study calls for more education for adults, and female producers should be encouraged and given the opportunity to manage the large-scale grain farming segment. In addition, the government is compelled to provide strategies about proper input appliances and set up a pilot research institution in the study area.