Inefficiency Effects Model Research Articles

Efficient Management of Farm Resources and Food Consumption Level of Pond Fishers in North-Central Bangladesh

Aims: The study was conducted to assess the efficient management of farm resources of pond fish farmers and level of their household food consumption in order to deal with sustainable development of pond culture system and food security issue.
 Study Design: Three unions out of 9 in Melandah upazila of Jamalpur district were selected, as a large number of ponds are available. Sixty fish farmers were randomly selected from the population of 200. Data were collected using a structured questionnaire during January to March 2017.
 Methods: Cobb-Douglas stochastic frontier production function and technical inefficiency effect model were used to assess efficient management of farm resources. Also, multiple regression models in double-log forms were employed to determine the factors influencing households’ per capita food consumption, calorie intake and protein intake.
 Results: Gross return and net profit were $8,081 and $2,262 respectively and cost benefit ratio was 1.39. Technical inefficiency estimates show that farmers’ education (0.0009) and training (0.0042) had insignificant but positive sign for fish production. Experience (-0.0083) and culture period (-0.0054) had significant and negative sign and age of farmers has insignificant negative sign indicated that technical efficiency increased with the increase in experience and fish culture period. The mean efficiency was 0.92 in fish farming indicates 8% of fish production could be increased with the existing resources and available technology. Per capita per day food consumption was 1288.36 g, calorie intake 2592.23 k. calorie and protein intake 84.27 gram.
 Conclusion: A linkage between Upazila Fisheries Officer, Bangladesh Fisheries Research Institute, fisheries extension workers and pond fish farmers should be established. Calorie and protein intake of the farm households is higher due to increase of food sufficiency of the country and buying capacity of the farmers but the nutritional wellbeing of them is still low.

The Measures of Efficiency of Power Generation Plants in Sylhet of Bangladesh

This study measures the performance of power generation plants in Sylhet region of Bangladesh considering twenty-four-month monthly dataset during 2013-14. To measure the performance of those plants, gross electricity generation was considered as output for the stochastic frontier model, whereas fuel consumption, lube oil consumption, auxiliary consumption, cost, heat rate, and hours of run were considered as input variables. Based on the log-likelihood hypothesis test, trans-log production model is preferred over Cobb–Douglas (C-D) production model for this study. The average efficiency of the selected plants is above 90 percent, and there is Sylhet Combined Cycle Power Plant (CCPP) which has an efficiency of about 78.6 percent for truncated normal distribution. In the time-variant inefficiency effects model, fuel consumption, cost, square product of lube oil consumption, interaction between fuel consumption and lube oil consumption as well as auxiliary consumption, and hours of run have a significant positive influence on power generation. On the other hand, some input variables such as hours of run and interaction between cost and heat rate have a significant negative influence on power generation. The estimated values of the time-varying inefficiency parameter η are positive for both the truncated and the half-normal distribution. This result indicates that technical efficiency has declined over the reference period of the study.

Diversification, efficiency and productivity in catch share fisheries

This study investigates the relationship between diversification, technical efficiency (TE), and productivity in the US Gulf of Mexico commercial red snapper fishery. We estimated a vessel-level input-oriented stochastic distance frontier simultaneously with a technical inefficiency effects model using a 20-year unbalanced panel (1997–2016). The panel documented the fishing activities of 1,255 fishing vessels, 10 years before and after the adoption of the red snapper catch share program in 2007. Our study points to the desirability of diversification in catch share fisheries. It shows that red snapper fishers who diversified their fishing portfolio tended to be more productive and technically efficient. The study found evidence that diversification resulted in cost savings from catching multiple species (diversification economies), and that the productivity of the fleet increased (diversification efficiencies). The analysis also showed that the TE of the fleet increased in the catch share period. The average TE rose from 0.78 in the command and control period to 0.85 in the catch share period. Higher TE scores were associated with higher levels of diversification. Our results suggest that policies that encourage diversification such as reducing quota ownership caps, adjusting quota carryover provisions, and providing governmental assistance to increase participation in other fisheries deserve further attention.

THE IMPACT OF SUPPORT POLICIES ON TECHNICAL EFFICIENCY OF FARMS IN KOSOVO

The effects of support policies on technical efficiency are not clear and are very complex because the results may be either positive or negative. The effects can be positive if the money received will serve as an incentive to innovate or to switch to new technologies or can have a negative effect if the money received increase the income of the farms and as a result prefer to have more leisure time. Given the theoretical uncertainty of the impact of supporting policies on efficiency, productivity and added value, the aim of this paper is to address this issue empirically. This paper contributes to the literature for the case of Kosovo by fulfilling the following objectives (i) to measure technical efficiency of farms in Kosovo and (ii) to identify the effect of subsidies by employing a stochastic output distance function and an inefficiency effect model as the one proposed by Battese and Coelli (1995). Parametric stochastic frontier approach was employed to estimate technical efficiency and to determine the effect of exogenous variables on technical efficiency through one-step approach. The share of total subsidies to total output (%) was used as proxy for policy variable and a set of farm characteristics as exogenous variables. We used FADN of Kosovo data provided by MAFRED for 2014. The results suggest that on average a farm in Kosovo produced 15.7% of the maximum output, while the rest of the potential output was lost due to technical inefficiency. Subsidies had negative effect on technical efficiency, however insignificant.

Technical efficiency and artisanal fishing households: Any hope in oil extracting locations? Evidence from Nigeria

Artisanal fishing household’s production is investigated using stochastic frontier analysis through Cobb-Douglas production function, which incorporates an inefficiency effects model. Descriptive statistics and profitability index were also used to analyzed the data collected. One hundred and twenty eight households were randomly picked through multistage techniques in the Niger Delta Region of Nigeria. Primary data were chosen using structured questionnaire and interview schedule. Results indicates that greater part of respondents were males with an average age of 42 years who were married with household size of 6 persons. Very many of them did not belong to cooperative society with high educational level. The result indicates that labour, baits and capital inputs were significantly related to output. The average technical efficiency was 73%. This means that the households can still improve their efficiency level by 27%. The structure of production suggests that the returns to scale was 0.9584. The estimated gamma parameter was 0.9423 and was significant at 5% level. Access to credit, membership of cooperative society and fishing experience had an inverse relationship with technical inefficiency while age, fishing distance, gender, number of trips and oil spill had a direct relationship with inefficiency. Artisanal fishing was found to be profitable with a net farm income of N135261.21 and a benefit cost ratio (BCR) of N1.20k. The major constraint to artisanal fishing was pollution. Therefore, the study calls for policies that increases the security of oil pipelines in order to stem the tide of oil spillage and invariably water pollution.

Non-Parametric Approach towards Smallholders Rubber Production Efficiency: A Two-Stage Data Envelopment Analysis (DEA)

In South Sumatra, Indonesia, the productivity of smallholders’ rubber is lower than the productivity of private and government estates. The productivity of Indonesian smallholders’ rubber can be enhanced through intensification or technology improvement. The main objective of this study is to estimate the technical efficiency level and technical inefficiency effect model of smallholder’s rubber in South Sumatra. A survey was conducted from November 2016 to March 2017 in 11 districts in the South Sumatra Province. 384 rubber farmers were selected using a combination of purposive, multi-stage and random sampling techniques. This study employed a non-parametric approach (Two-stage DEA) using cross-sectional data to understand the rubber production process. The findings showed that the mean technical efficiency of the sampled farms under the VRS DEA was estimated at 0.80. However, the mean technical efficiency was still less than 0.82, indicating that on average, the sampled farms were not technically efficient. Tobit regression results showed that all of the determinants have the expected signs (negative) in relation to technical inefficiency, thus implying that these factors increase technical efficiency as expected. However, only two of the determinants, farming experience and tapping system were statistically significant to the level of technical efficiency.

Batik SMEs Efficiency and Entrepreneurship Role in Innovation

In the long term, batik SMEs to compete in the local and global markets can not only rely on production capabilities rooted in local sources of uniqueness, but must have efficiency of economies scale for resource access and innovation. In a competitive environment, entrepreneurs in the batik industry have an important role to improve the efficiency. This study analyzed the role of entrepreneurs in the economic efficiency. This study applies production model to describe the entrepreneurs role on economic efficiency. The study was conducted by interviews to 100 Batik SMEs managers-owners in the Batik Centre in Solo, Pekalongan and Rembang. The entrepreneurs role in innovation in term of product innovation, marketing innovation, and business alliances (cooperatives). Data analysis was performed using Stochastic Frontier and Deterministic Regression Analysis. The empirical results of the technical inefficiency effects model suggest that the entrepreneurs role in product innovation, marketing innovation and business alliances are important factors affecting economic efficiency of batik SMEs. The role of entrepreneurship in marketing innovation has the highest elasticity of the production and sales of batik, and then followed by the role of entrepreneurs in new product innovation and business alliances.

Resource Use Efficiency as a Climate Smart Approach: Case of Smallholder Maize Farmers in Nyando, Kenya

To simultaneously enhance agricultural productivity and lower negative impacts on the environment, food systems need to be much more efficient in using resources such as land, water, and fertilizer. This study examines resource use efficiency of maize production among smallholder farmers in Nyando, Kenya. The main objective is to assess the degree of technical efficiency of smallholder farmers and identify the impact of so-called “climate smart practices” on technical efficiency. The method of Stochastic Frontier Analysis is used to simultaneously estimate a stochastic production frontier and a technical inefficiency effect model. Data for 324 subplots farmed by 170 households were available for this analysis. The study reveals that maize production in Nyando is associated with mean technical efficiency of 45% and that soil conservation practices such as residue management, legume intercropping, and improved varieties significantly increase farmers’ technical efficiency. Soil carbon is found to be a critical factor of production. These results imply that there is potential to more than double production using the same resources and that soil conservation practices can be very “climate smart,” at once increasing soil carbon, production, climate resilience, and technical efficiency.

Efficiency performance of fertilizer use in arable agricultural production in China

PurposeFertilizer overuse is regarded as one of the main contributors to agricultural pollution and environmental problems in China. The purpose of this paper is to evaluate technical efficiency (TE) and fertilizer overuse index (FOI) with respect to China’s arable agricultural production and examine regional variations in terms of fertilizer overuse.Design/methodology/approachThe maximum likelihood random effects–time varying inefficiency effects model was applied to estimate TE, fertilizer use efficiency (FUE) and FOI.FindingsOver the study period (2011–2015), TE steadily increased for each individual province. Overall, mean annual TE was 0.811, implying that, on average, Chinese provinces could increase output by 18.9 per cent given unchanged levels of inputs and technology. Mean annual FOI ranged from 0.008 to 3.139, with a mean of 0.685, suggesting that there is fertilizer overuse in almost all provinces, and that large regional variation exists. Coastal provinces were found to have the highest TE scores, while the central region showed the highest degree of fertilizer overuse.Originality/valueThe results indicate that fertilizer use has had a significant positive impact on production in the China’s arable agricultural sector. High TE was not necessarily associated with low FUE.

Inter-state analysis of energy efficiency- a stochastic frontier approach to the Indian paper industry

PurposeThis paper aims to measure the state-level energy efficiency in Indian paper industry and simultaneously explain inter-state variation in efficiency by inefficiency effect model. Three variables, labor productivity, capital intensity and structure of paper industry, are included in inefficiency effect model to assess the likely impact on energy efficiency.Design/methodology/approachSub-vector input distance function is derived through neo-classical production function which provides measures to estimate energy efficiency. Assuming a translog production function specification, energy efficiency is estimated by using Battese and Coelli (1995) stochastic frontier analysis (SFA). The authors also estimated four other SFA models, and energy efficiency from all the models is compared for robustness checking.FindingsThe results show the existence of a vast potential to improve energy efficiency. Inefficiency effect model reported a positive impact of structure of the industry and capital intensity on energy efficiency performance, while labor productivity does not have any significant impact on energy efficiency. There exists considerable energy efficiency variation among states. Uttarakhand, Punjab and Orissa are the best performing states while Rajasthan, Jharkhand and Goa have worst energy efficiency performance based on average efficiency. The ranks assigned to states according to inefficiency effects model are found contrary to the simple measure of energy efficiency, i.e. energy intensity. Thus, energy intensity may not always be a good proxy for underlying energy efficiency and need to be compared with a comprehensive possible measure.Originality/valueTo the best of the authors’ knowledge, this is the first study which measures energy efficiency of Indian paper industry through stochastic frontier model using region-level data. Instead of relying on traditional energy efficiency indicators (energy-output ratio), total-factor energy efficiency approach is used to conduct the empirical exercise. Deviations from the frontier because of factors beyond the scope of producers are also incorporated into analysis to portray the magnitude of random factors in influencing the efficiency performance.

English

Seed is one of the key inputs for rice production. The quantity of rice seeds produced is largely below the demand expressed by rice producers in Benin. In recent years, several projects have been implemented to promote this activity. A one stage stochastic frontier production which incorporates a model for the technical inefficiency effects was applied on a whole population of 141 farmers identified in the irrigated site of Koussin-Lele, Benin. The result showed that the technical efficiency ranged from 69% and 99% with the mean of 92%. The most efficient producers had the best yields, 5,096 kg/ha comparable to the experimental potential yields estimated at 4,800 to 5,000 kg/ha in a controlled peasant environment. Farmers who exercise the multiplication of rice seeds as their main activity educated producers and those who are often in contact with agricultural advisers are the most technically efficient. Therefore, the current institutional environment is favorable to rice seed farmers in the study area. The undertaken actions implemented in recent years must be continued and strengthened. The content of the extension should also be focused on appropriate techniques of fertilization and/or restoration of soil fertility to prevent the misuse of mineral fertilizers. Special attention should be given to the producers in the village, Lele, to help them improve their technical efficiency. Key words: Rice seed, technical efficiency, irrigated perimeter, Koussin-Lele, Benin.

Technical Efficiency of the Setbag Net Fishery in Bangladesh: An Application of a Stochastic Production Frontier Model

A study was conducted to examine the technical efficiency for Setbag net fishing boats operated in the year 2014. A total of 100 samples of Setbag net fishing boats were selected, of which 40 were from Cox’s Bazar, 40 were from Chittagong and 20 were from Bagerhat. Stochastic frontier (with technical inefficiency effect) model was specified and estimated. Results have shown that the estimated mean technical efficiency of Setbag net fishing boats is 84 percent. The efficiency of Setbag net fishing boat was positively associated with total cost, while the number of nets were negatively related to fishing day and crew size. Head maji’s age had significant effect on inefficiency at 5% level. Although, the effect on boats’ efficiency was positive, (though insignificant) for head maji’s experience, head maji’s education, engine horse power and boat age. The use of modern fishing boat and improved fishing technology should be promoted, through proper training and motivation program for fisher. At the same time old and unfit fishing boat and gears should be gradually removed and replaced by new and modern fishing boat.The Agriculturists 2017; 15(2) 59-65

Sources of efficiency, productivity and output growth in Botswana agriculture

AbstractThe purpose of this study is to explore reasons for the decline in agricultural performance in Botswana that has occurred during the implementation of a variety of policy measures, as well as the introduction of new technologies, and to identify ways in which it might be reversed. Panel data from six regions in Botswana (period 1979–2012) is analyzed with a stochastic output distance function and inefficiency effects model. We decompose agricultural output growth into; total factor productivity (TFP) and changes in input use (factors of production). TFP is further decomposed into scale effects, technical efficiency and technological change. The results show that over the study period agricultural output grew at a very low rate of 0.072 percent per year, which is largely due to a growth in factors of production at 0.071 percent per year rather than TFP growth (which declined at 0.003 percent per year). We found that the decline in productivity has been due to technological regress and low growth in technical efficiency and scale efficiency. Policy options aimed at improving agricultural productivity and output growth will require the strengthening of extension services; improving the agronomic and husbandry management skills of farmers through training; and by encouraging farmers to adopt and utilize technologies that have been provided under existing policy programs.

Determinants of Technical Efficiency of Small Scale Sunflower Oil Processing Firms in Tanzania: One Stage Stochastic Frontier Approach

Sunflower oil processing firms have recently captured the attention of many scholars due to their contributions along the value chain. Despite their contributions, 75% of them operate under capacity with steadily declining technical efficiency. This paper estimates the technical efficiency of sunflower oil processing firms in Tanzania and the factors contributing to their inefficiency. We used firm-level average production data for three years from 2013 to 2015 collected from a sample of 219 Sunflower oil processing firms. Data were analyzed using one Stage Stochastic Production Frontier with inefficiency effect model under the Maximum Likelihood Estimate (MLE) technique. We found that Capital and materials input factors of production contributed statistically significantly to the output of the firms under the study. In the same way, firm age, location, ownership type, age and education of the owner were found significant determinants of technical efficiency in sunflower oil processing firms in Tanzania. The findings in this paper imply that there is a need to adopt efficiency-enhancing measures including replacement of existing old machines since inefficiency increases with age; affordable industrial locations for easy accessibility and support services; and promotion of proper entrepreneurial education to owners.

Credit Availability and Technical Efficiency of Boro Rice in Pabna District, Bangladesh: A Stochastic Frontier Analysis

The goal of this study is to analyze the technical efficiency and its determinants of rice production in Bangladesh using data from Boro rice farmers of Pabna district. Required data are collected from 100 Boro rice producing farmers of Pabna district selected using multistage random sampling procedure. In scrutinizing the data, farm specific technical efficiency scores are estimated using the Cobb-Douglas Stochastic Frontier Production function approach. The study found that technical efficiency of Boro rice farms in Pabna district are 92.3% which indicate that Boro rice farms have been operating below the maximum level of production frontier. It is also found that 'ploughing cost' 'pesticide cost', 'labor cost', and 'irrigation' are the significant elements that affect the level of technical efficiency while ''fertilizer cost' and 'seed' are found insignificant in moving technical efficiency of Boro rice production in the study area. Farmers can increase their production of Boro rice by 7.7% given the available technology through increasing the use of labor, seed also irrigation inputs and also by using proper amounts of fertilizer and pesticide inputs. The outcomes from the assessed inefficiency effect model make known that farm size, age, education, training and credit facility are the significant influences which are negatively related to technical inefficiency of Boro rice production. This study provides that steps to raise education, training as well as credit facilities are influential to reduce technical inefficiency of rice production in the study area. Intuitively, in this connection as a long run approach, the investment on research connected activities should be increased to change the production technology.

Assessment of technical efficiency of open shed broiler farms: The case study of Khyber Pakhtunkhwa province Pakistan

Abstract Efficient use of inputs is very essential for broiler farmers to get the maximum possible output for enhancing productivity and ultimately profit of the farm. This study estimated and assessed technical efficiency of broiler farms in district Charsadda of Khyber Paktunkhwa province, Pakistan. In order to achieve the aforesaid objective, multistage random sampling technique was used to collect data from 120 broiler farms. Parametric approach (Stochastic frontier) was employed for analysis of data. Contrary to non-parametric approach, parametric approach entangle modeling cost/production frontier using various econometric techniques. The underlying principle behind the parametric approaches such as Stochastic frontier approach is that it accounts for random error (factors outside the scope of the farmers which affect production cost) and separate the inefficiency component from it and make credible statistical inferences and also the parametric approach has not received any valid criticism since its introduction. Stochastic frontier production function of Cobb- Douglas type was utilized for the estimation. The function was estimated using Maximum Likelihood estimation technique. The results revealed that mean technical efficiency of broiler farms was 0.85 ranging from 0.61 to 0.99, implies that an average farm could produce 14% more output for given level of inputs if they become technically more efficient. The estimated coefficient of the number of day old chicks and feed were 0.45 and 0.21 and statistically significant at 1% and 5% level of significance, respectively. In technical inefficiency effect model, the estimated parameters of age, experience, credit, occupation and labor used were negative and statistically significant. It is suggested that according to the capacity of shed the broiler farms need to increase the number of day old chicks as wells as feed to enhance productivity. Provision of training facilities to the farmers, appropriate to rearing of broilers in open shed farms is a good option for efficient utilization of resources and enhancing efficiency. Provision of credit facilities to broiler farms on easy terms and conditions for purchase of day old chicks, feed, labors and other inputs involved in broiler farming will boost up broiler productivity and efficiency of farmers.

Accounting for the Gender Technology Gap Amongst Smallholder Rice Farmers in Northern Ghana

AbstractNarrowing the gender technology gap in agricultural production has become a critical policy issue in sub‐Saharan Africa. A better understanding of the gender technology gap is essential for policy formulation and programme planning to ensure equity in resource allocation, and household‐level food security in low and middle income countries, such as Ghana. We employ a metafrontier approach to analyse the differences in the efficiency of male and female farmers, recognising the endogeneity of some of the variables in the inefficiency effects model, in particular the credit constraints of the rice farmers under study. Our findings show that while the rice farms themselves are very similar, average yields for male managed farms tend to be significantly higher than female managed farms reflecting higher seeding and fertiliser application rates on male managed farms. However, there is no significant difference between the genders in either land used for rice or total output per farm household. We find some evidence that relative to the metafrontier, male managed farms are less efficient than female managed farms. The results further show gender technology gap amongst the smallholder rice farmers with females’ technology gap ratio being significantly greater than that of males, with females operating on a production frontier closer to the metafrontier. Policies that provide females more access to productive resources and other agricultural services could assist in the generation of relatively higher output.

Technical Efficiency of Manufacturing Firms in Cameroon: Sources and Determinants

The primary objective of this study is to analyze the determinants of efficiency in manufacturing firms in Cameroon. The study used a stochastic frontier model employing RPED data of 319 firms from different manufacturing industries. The data are micro-level which is the most adequate type of data used in the estimation of these models. The model used is that outlined by Battese and Coelli (1995) which determines the causes of inefficiency in the manufacturing sector in Cameroon. The estimates of the stochastic production frontier with inefficiency effects model indicates that firms in Cameroon exhibit various degrees of technical inefficiency for the sample of firms considered. The results show that firm size plays an important role in explaining technical efficiency in the sub-sector of food processing. However, large firms reduce technical inefficiency levels of firms in all the sub sectors. Another important variable which has an effect in determining technical efficiency level is the foreign ownership variable. It is significant in food processing, wood processing, textile and garments as well as in the overall sample. Hence, it increases technical efficiency in all the sub-sectors. Finally, since an increase in age of firms leads to a reduction in efficiency levels in manufacturing firms, policies should be adopted to replace the existing capital in the large firms.

Measuring the Impact of Socio-Economic Factors on School Efficiency in Australia

This paper examines the productive efficiency of government schools in New South Wales (NSW) in Australia. The study uses a technical inefficiency effects model applied to a unique three-year panel dataset containing 1235 primary and 371 secondary schools in NSW. A stochastic frontier production function and an inefficiency effects function that control for school socioeconomic and environmental factors are estimated. The dataset contains information on various school inputs, school expenditures by major functional area, parental socioeconomic characteristics, student characteristics, and standardized test scores. We examine the degree to which school and non-school educational inputs influence student achievement scores and find that, overall, primary schools are 88.6% and secondary schools 96.4% efficient. The index describing community socio-educational advantage has the most significant influence on students’ achievement scores.

Impact of all-inclusive packages on hotel efficiency

In the last decade, all-inclusive packages have had an extraordinary boom in one of the most popular sun and beach tourism destinations in Europe, the Canary Islands. This fact reinvigorated the debate on potential benefits and negative effects on the local economy. However, there is no empirical evidence of the impact that all-inclusive packages may have on the efficiency in the hotel industry. This study assessed the effects of all-inclusive packages on cost and profit efficiency using the stochastic frontier approach and the model proposed by Battese and Coelli [(1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20(2), 325–332] in a sample composed of 102 hotels of the Canary Islands from 2008 to 2014. The empirical results revealed that the hotels that offered all-inclusive packages exhibited lower efficiency levels than those hotels that did not provide this service. These results have important implications for both public policies and hotel management.