The Technical Efficiency of Organic Herbs: The Case of Egypt

Abstract

The main purpose of this study is to compare the efficiency ratings of organic and conventional herbs and spices farms in the Egyptian delta. To do so, we use stochastic production frontier (SPF) analysis with a Cobb–Douglas stochastic frontier model as a functional form specification for the data. Additionally, we study the factors affecting technical efficiency scores reflecting farmer and farm characteristics (i.e., farmer experience, type of soil and irrigation, location in different governorates as an indicator of being located in a less favored area). Computing output elasticity of different inputs assesses productivity differences between both agricultural practices. The analysis adopts cross-sectional, farm-level data collected from a random sample of 232 (135 organic and 97 conventional) farms that specialize in herbs and spices. Output elasticities of different inputs show that organic farms exhibit higher output elasticities than conventional farms. Labor and area are found to be the most productive factors in organic farming. Organic farmers, on average, are more technically efficient than their conventional counterparts (efficiency ratings are approximately 0.75 and 0.91, respectively). Hence, the results suggest that, by using available resources more efficiently and without changing current technology, organic (conventional) farms can increase their output by about 9% (25%). Concerning the factors influencing technical efficiency, they are found to be relevant.