The technical efficiency of rice farming and mobile phone usage: a stochastic frontier analysis

Abstract

Although there is growing literature on the role of mobile phones in shaping the price and market structure of agricultural products, the role of mobile phones in farming practices is mostly unexplored. This paper aimed to fill the gap in the literature by investigating whether the mobile phone is a determinant in improving the technical efficiency of rice farming in Indonesia. Rice is the most important agricultural commodity in Indonesia because it is the staple food for around 270 million people. In addition, it also plays a major role in carving the country’s inflation expectation as well as economic stability. This study uses a production function that includes labour, harvest area and seeds as inputs. The stochastic frontier analysis is employed to examine the level of technical efficiency of rice farming in Indonesia as well as whether mobile phone usage can improve technical efficiency. This study utilizes 2120 rice farm household data obtained from Indonesia Family Life Survey (IFLS)-5 in 2014. The results from the inefficiency model show that mobile phone usage is significantly correlated to the decrease in inefficiency in rice farming along with farmers’ education and irrigation implementation. However, rice farming on farmers’ land is significantly correlated to the increase in inefficiency, which implies that rice farming on rented land is more efficient. The technical efficiency level of rice farming In Indonesia obtained from the production function model is 0.59. In addition, the size of the harvest area and the use of superior seeds are positively and significantly correlated to output. However, the number of labour is not significantly correlated to the level of rice production.