Sources Of Technical Inefficiency Research Articles

Technical efficiency and technology gap in Kenya’s tea industry: accounting for farm heterogeneity

ABSTRACT The study used a cross-county survey from Kenya to investigate smallholder tea farmers’ performance using a stochastic metafrontier framework. According to the results, farmers in all four regions are falling short of their potential with the mean technical efficiency ranging from 0.69, 0.77, 0.61, and 0.74, respectively, for the Nandi, Mau, Kisii, and Kericho regions. Comparing its performance with the technology available in the industry, each region faces a technology gap. Even though some variables were not statistically significant, a combination of socioeconomic and farm-specific factors were identified as sources of technical inefficiency among farmers. The farmers in all regions, however, possess the potential to overcome technological constraints and achieve higher levels of productivity. Kenya Tea Development Agency Ltd should, therefore, enhance its efforts to help the farmers improve their management and technical skills on how to use their resources more efficiently.

Optimization Model of Use of Production in Order to Increase Production and Eficiency of Potato Business in Kerinci District, Jambi Province

This research aims to; analyze the optimization model of the use of production inputs in order to increase production and the efficiency of potato farming. This study uses cross-section data from 62 farmers. Sampling was done by Simple Random Sampling. The approach taken to examine the response of production to inputs is made descriptively. The production and efficiency functions are estimated using the stochastic frontier production function and the dual cost function. The results showed that there was no optimal use of production inputs. The frontier production function was mainly determined by the input of seed production of SP-36 fertilizer, KCL fertilizer, and liquid insecticide. The determinants of optimal production are determined by the use of seeds, urea fertilizer, and the use of drugs. The optimal use of inputs can produce an optimal production of 21,768 kg, while the actual production is only 12,250 kg. The use of seeds, SP-36 fertilizer, organic fertilizers, liquid insecticides, and labor are risk-reducing productivity factors. The technical efficiency of potato farming is in the medium category (ET=0.6644). Sources of technical inefficiency mainly come from the land area, age, and distance of farming land. Meanwhile, income, farming experience education and the number of family members reduce the occurrence of technical inefficiency. Farmers' behavior in responding to productivity risks is the average risk taker.

Measuring production performance of Moringa oleifera

ABSTRACT Moringa (Moringa oleifera L) is an underutilized vegetable mostly grown by smallholder farmers whose technical efficiency for this emerging crop is not well known. It is necessary that empirical evidence be developed on technical efficiency to optimize its production and promotion. The study estimated technical efficiency, and sources of technical inefficiency, among smallholder producers of moringa. A total of 360 growers were randomly selected from Osun and Oyo States. A stochastic production frontier model was employed, while correcting for heteroscedasticity in stochastic and inefficiency error terms. There was increasing return-to-scale and farmer average technical efficiency of about 82%. Fertilizer, seed, and labor were production-increasing variables; farm size decreased output of M. oleifera. Sources of farmer technical inefficiency were age, education level, and farmer experience. Formal skills development training could help improve technical and managerial capacities of farmers.

Impact of climate change adaptation strategies on rice productivity in South-west, Nigeria: An endogeneity corrected stochastic frontier model

The study assessed the impact of climate change adaptation strategies on technical efficiency of smallholder rice farmers in South-west Nigeria. An endogeneity corrected stochastic frontier model which account for the endogeneity of adoption of adaptation strategies that is likely to depend on inefficiency was employed for the study. The result of the study revealed that adoption of adaption strategies is endogenously determined with rice productivity and hence, failure to account for endogeneity, the parameter efficiency estimates would be inconsistent. The empirical results from the model show that quantity of labour, herbicides and the interaction of labour with both farm size and insecticides were statistically significant in explaining the variations in the efficiency of rice production in the study area. In addition, the study identified the combined effects of climate change adaptation strategies and some socioeconomic characteristics such as age, gender, education, farming experience, access to credit, access to information, membership of farmers in agricultural based cooperative and location of rice farmers as sources of technical inefficiencies. The study concluded that increase implementation of climate change adaptation strategies could enhance rice productivity and technical efficiency of rice farmers through timely access to climate change information and other related institutional support. Based on farmers' knowledge and understanding of changes in climatic conditions and the adaptation strategies to mitigate its effect, it is therefore important for the government, stakeholders and donor agencies to involve farmers in the climate change adaptation planning process.

Sources of Technical Inefficiency of Smallholder Cow Milk Producers in Yabelo District of Oromia Region, Ethiopia

This study measures the level of technical efficiency of smallholder cow milk producers using stochastic production approach of Cobb-Douglas production form and identified the possible cause for inefficiency in cow milk production using Tobit regression model. The data collected from 177 sample household randomly selected from pastoral and agropastoral Kebeles of Yabelo district. The result indicated the mean technical efficiency of cow milk producers of 71.42%. This means if producers are producing in fully efficient way, they can save on average 28.56% of their current input to produce their current output or increase their current milk output by 28.56% without additional inputs requirement. The gamma parameter, ℽ, was found to be 0.70 showing 70% of the deviation of actual output from potential output was due to technical inefficiency. Among the five inputs used, milk output was positively and significantly the function of labor, grazing land, and hay forage. The result of Tobit regression model shows that family size, size of livestock holding, extension contact, distance to veterinary clinic, distance to water positively and significantly contributed to inefficiency while age and education level of household head negatively and significantly affecting inefficiency of milk producers. Evidently intervention on access to water source, veterinary clinic, education, family planning and productivity oriented livestock holding will improve technical efficiency of cow milk producer of the study area. Keywords: Technical efficiency, stochastic production approach, Tobit regression, Yabello district. DOI: 10.7176/FSQM/99-01 Publication date: July 31 st 2020

Estimating financing gaps in rice production in Southwestern Nigeria

This study analysed the financing gaps relative to production frontier of rice farmers in Southwestern Nigeria. A multistage sampling technique was used to collect cross-sectional data from 360 rice farmers selected from three states in the region. A Cobb–Douglas stochastic frontier and an adapted form of Harrod–Domar (HD) growth model was employed to determine the financing gap required the farmers to be at the frontier level. The empirical results of the frontier model show that quantity of labour, quantity of rice as planting material and herbicides were statistically significant in explaining the variations in the efficiency of rice production in Nigeria. However, age, gender, farming experience, household size, access to credit, access to information, adoption of improved variety and location of rice farmers as sources of technical inefficiencies. As revealed by the result of the HD growth model, the average amount of credit per season that farmers had access to was, 38,630.56 naira (₦) while the mean financing in the form of credit required to produce at the frontier level was ₦193,626.50, showing a financing shortfall of about 80%. As unravelled by the result of the study, it can thus be concluded that technical efficiency of rice farmers can be improved by ameliorating access to timely credit and agricultural information for improving rice productivity. These findings suggest that filling the financing gap of smallholder rice farmers will improve rice productivity in Nigeria. The study, therefore, recommends that strengthening the existing technology by building farmers’ capacity on farm management practices would be the surest means of improving rice productivity growth in Nigeria. This would not only contribute to the intensification of rice production in Nigeria to meet its increasing rice demand, but also improve rice farmers’ productivity and their households’ incomes.

Decomposition of technical efficiency in agricultural production in Africa into transient and persistent technical efficiency under heterogeneous technologies

Abstract The agricultural sector remains a cornerstone to Africa’s economic transformation and the achievement of the Sustainable Development Goals (SDGs). However, the sector’s performance, in terms of productivity growth, has been sub-optimal when compared with performances in Asia, America, and Europe. Technical efficiency is a major contributor to the growth in agricultural productivity. However, there is limited research about the sources of technical inefficiency in agricultural production in Africa. This is critical given that Africa has problems with food security and high poverty. This study applied a parametric technique to estimate technical efficiency in Africa’s agricultural sector under heterogeneous technologies, while separating unobserved country-specific heterogeneities from transient and persistent technical efficiency. Data consisted of 49 African countries spanning from 1990 to 2016. Assuming a homogeneous technology, the estimated mean technical efficiency of 38.2%, suggests that, in Africa, about 62% of the potential agricultural output is untapped. However, considering heterogeneity in production technologies, the mean estimated technical efficiency value differed between the two classes. The numbers suggest that about 59% and 69% of untapped potential agricultural output in class one and class two groups, respectively. In all cases, persistent technical inefficiency hinders technical efficiency, an indication that government or regional agricultural policies should be long-term oriented. With the evidence of conditional convergence in technical efficiency, efforts to improve persistent technical efficiency can drive regional targets in food security and poverty alleviation and induce inclusive growth and sustainable development.

Estimation and determinants of efficiency among rice farmers in Benin

Rice plays an important role in achieving food security in Benin but its production remains low and needs to be optimized. This study estimates technical and allocative efficiencies as well as the sources of inefficiency among rice producers in Benin. The data used cover 210 rice producers, proportionally distributed in the Departments of Mono and Couffo. This farm-level data were collected under the project “Facilité d’Appui aux Filières Agricole du Mono et du Couffo (FAFA-MC).” We employed a stochastic frontier approach to analyze technical efficiency and the marginal value product approach for allocative efficiency analysis. Furthermore, a Chow test was performed to test for difference in determinants of efficiency between the two departments. We found that the average technical efficiency score of rice producers is 78%. The sources of technical inefficiency were age, gender, education level and access to credit. The results also revealed allocative inefficiency in rice production. Labour was overused while other inputs such as seeds, herbicide, and fertilizer were underutilized. Allocation efficiency was influenced by age, gender, area planted, type of culture, and access to credit. Finally, we found difference in determinants of efficiency between the departments of Mono and Couffo. Our results imply that there are opportunities to increase rice production in the Departments of Mono and Couffo. Rice producers in these departments therefore would benefit by adopting better farming practices such as the use of fertilizers, agrochemicals, and irrigation facilities.

Analysis of Technical Efficiency of Guava Farmers in Yobe State: A Stochastic Frontier Approach

This study was carried out to analyse the technical efficiency of Guava farmers in Yobe State. A multistage sampling technique was employed to select a total of 200 respondents from Potiskum and Fune Local Government Areas for the study. Data collected were analysed using frequency distribution, means and percentages. A Stochastic Frontier Production Function which incorporated inefficiency causes were estimated using Maximum Likelihood Estimation technique. The results of the stochastic frontier function analyses revealed a mean technical efficiencies levels of 74%, implying that there was scope for increasing efficiencies by 26%. The main sources of technical inefficiencies were years of farming experience, extension contact, membership of cooperative societies, amount of credit obtained and educational level. The study recommends that extension contact, years of cooperative membership and access to credit were the sources of the inefficiencies and should be addressed through adequately trained and equipped extension workers, right use of credit facilities and the formation of cooperative societies and making membership a condition for microcredit benefit.

Industrial Efficiency Evaluation in China: A Nonparametric Production-Frontier Approach

An industrial system has positive and negative strategies to adapt to environmental regulations, which can be defined as natural disposability and managerial disposability. Meanwhile, the operational process of an industrial system can be divided into regular production activities and pollutant control activities. Within this, industrial system’s technical efficiency (TE) can be decomposed into economic efficiency (ECE) and environmental efficiency (ENE). On the basis of natural disposability and managerial disposability, this paper proposes static and dynamic data envelopment analysis (DEA) models to evaluate the efficiencies of industrial systems. Based on the proposed approach, TE, ECE, ENE, and Malmqusit productivity index (MPI) values were obtained simultaneously. The MPI values were further separated into the effects of static efficiency change and technical change. The proposed method was applied to assess the technical efficiencies of Chinese regional industrial systems between 2011 and 2015. Key findings are that (1) the low ENE is the main source of technical inefficiency; (2) the average static TE and ENE under natural disposability are both lower than those under managerial disposability; (3) the static efficiency change and technical change of TE are similar to those of ENE; and (4) the technical change has a significant impact on the changes in TE.

Technical Efficiency of Smallholder Tea Production in South-Eastern Malawi: A Stochastic Frontier Approach

Tea production contributes 8.8% of foreign exchange earnings in Malawi. A study was undertaken in South-Eastern Malawi to understand the smallholder tea production system, estimate its technical efficiency and establish sources of technical inefficiency. A multi-stage sampling technique was employed to select 230 smallholder tea farmers, who participated in the study. Data analysis was done using SPSS and STATA. Smallholder tea production was characterised using descriptive statistics. A Cobb-Douglas Stochastic frontier model and Tobit Regression model were run in STATA to determine technical efficiency and sources of technical inefficiency respectively. The study found that the technical efficiency of smallholder tea farmers ranged from 16% to 92% with a mean of 67%. Education, distance to factory and farming experience significantly reduced technical inefficiency at 1%, 5% and 10% level respectively; and inefficiency was relatively low among farmers that utilised hired labour, and high among those that were contracted by government cooperative. Access to non-tea income was not a source of technical inefficiency. The findings of the study imply that various policies on extension and training have to be implemented to increase the knowledge of the smallholder tea farmers to ensure increased technical efficiency. Smallholder tea farmers should also be facilitated to access labour-saving technologies to enable them carry out timely farm operations.

EFISIENSI TEKNIS USAHATANI PADI TADAH HUJAN DI KAWASAN PERBATASAN KABUPATEN SAMBAS DENGAN PENDEKATAN STOCHASTIC FRONTIER FUNGSI PRODUKSI (KASUS DI DESA SEBUBUS, KECAMATAN PALOH)

Development of rice for food self-sufficiency in the border region of Sambas regency is quite prospective. However, in the District Paloh rice productivity is still relatively low, allegedly due to inefficiency in the use of inputs. The aim of this study was to analyze the efficiency and income of rice farming in the village of Sebubus, Paloh district. The research method used was stohastic frontier of production function with OLS and Maximum likelihood (MLE). The study was conducted in the village Sebubus, District Paloh between May - June 2014. Sampling was done with Proportionate Stratified Random Sampling. The data used was the cross section data obtained from interviews of 120 rice farmers. The Stohastic frontier of production function analysis was performed using the Cobb-Douglas models. The results showed that land, N fertilizer and K fertilizer significantly affected rice production at 95% confidence level. The results also showed that rainfed rice paddy was relatively efficient technically (mean efficiency of 0,81). Age of farmers was a source of technical inefficiency that significantly could improve technical efficiency. Characteristics of farmers such as age, education and experience could help farmers improve their technical efficiency of rice production. Rainfed rice farming in the village Sebubus was relatively favorable (profit of USD 4,099,582.50) and viable (the value of R/C ratio above 2,84 cash costs and the value of R/C ratio on total cost of $ 2,29).

MEASUREMENT OF TECHNICAL EFFICIENCY THAT INVOLVING FARMERS PREFERENCES TOWARDS RISK OF RICE FARMING IN MALANG (INDONESIA)

The aim of this research is to analyse the level of technical efficiency of rice farming by considering farmer preferences towards natural and technological risks. This research is conducted in selected regions in Malang Regency (Indonesia) with the consideration that farmers in selected areas can produce high productivity, but productivity growth fluctuates very sharply each year (within 13 years). Natural phenomenon that often appears as the risks of farming, such as, floods, droughts, and hurricanes. While, the application of technology is the part of the risks of farming, too, because farmers are not willing to adopt the technology which facilitated by the government. Rice farmers who used respondents are 305 people namely spread in seven selected regions in two seasons. The method used are a) Expected Utility of Money to measure the farmer preferences towards the risks and b) Stochastic Frontier Translog production function with Maximum Likelihood Estimation (MLE) approach to analyse the level of technical efficiency of farming. The results found that 77.7% of farmers have averter risk preferences, the level of technical efficiency obtained at 0.75 by pooling the data, and the influence of the preference of farmers to sources of technical inefficiency is -0622. Recommendation submitted is induced the technology with mentoring system and immediately implement the agricultural insurance.

The impact of the global financial crisis on the efficiency of Australian banks

The objective of this study is to measure the efficiency levels of major Australian banks and some regional banks before, during and after the Global Financial Crisis (GFC) by examining their pure technical and scale efficiencies obtained from the bootstrap Data Envelopment Analysis (DEA). The adopted bootstrap approach enables us to conduct statistical inferences regarding scale efficiency estimates of individual banks. We visualize bootstrapped results using an efficiency matrix to present the results of confidence intervals of pure technical and scale efficiency estimates. This novel approach facilitates efficiency comparison across the chosen sample banks for which consistent input and output data were available. This paper provides a useful benchmarking framework for individual banks to assess and identify their likely sources of technical inefficiency. The empirical results reveal that the global financial crisis had an adverse effect on the pure technical efficiency of Australian banks. In addition, the bootstrapped results indicate that small banks mostly operate in the region of increasing returns to scale while medium-sized banks are scale efficient. The results support the view that only smaller banks can enhance their efficiency from possible future mergers with other smaller-medium size banks. Any mergers involving the Big 4 banks are likely to lower the overall efficiency of the banking system and lead to anti-competitive behavior.

ANALISIS EFISIENSI TEKNIS DAN SKALA EKONOMI INDUSTRI PERBANKAN SYARIAH DI INDONESIA

Fitriningsih AmaloUniversitas Muhammadiyah KupangE-mail: ithyamalo@yahoo.comABSTRACTThis study aimed to measure the extent of technical efficiency of Islamic banking industry, analyzingpotential improvements composition of input and output, determine the source of technical efficiency,and to know the position of economies of scale. The analysis technique used Data EnvelopmentAnalysis (DEA). The determination of input and output used the intermediation approach. The variablesinputs are namely deposits, fixed assets, labour costs, and outputs (financing). Sampling techniqueis purposive sampling. Sample size are 18 banks the period 2007-2010. The results showedthat the technical efficiency of Islamic banking industry experienced volatile growth, the averagetechnical was not efficient (inefficiency). The efficient scored are namely DKI Bank (2007), Bank ofEast Java (2007), Bank of West Kalimantan (2007), Permata Bank (2008-2009), and Bank of westJava (2010). The sources of technical inefficiency in the Indonesian Islamic banking industry wasfrom the input and output variables. The potential improvements should be done by the bank tooptimize the use of inefficient input for maximizing output. Technical efficiency value was dominatedby pure technical efficiency while low scale efficiency and economies of scale position of Islamicbanking industry in Indonesia. During the period of observation shows the constant Condition Returnto Scale (CRS) four banks, Decreasing Return to Scale (DRS).The condition of the banks IncreasingReturn to Scale (IRS) were 13 banks. This condition means that the increase in output will befollowed by lower costs.Keywords: Technical Efficiency, Economies of Scale, Islamic Banking Industry, Data EnvelopmentAnalysis.

Source of technical inefficiency of smallholder wheat farmers in selected waterlogged areas of Ethiopia: A translog production function approach

This study was undertaken to investigate the technical inefficiency and factors affecting efficiency of wheat production in water-logged areas of Arsi-robe and Digelu-tijo districts of Arsi zone in southeastern Oromia region, Ethiopia. Both purposive and two-stage sampling techniques were used. Primary data was collected from 157 randomly selected wheat producing farmers through a structured questionnaire. The translog production function analysis revealed that the mean technical efficiency of wheat producers in the study areas in the season were 55%. Given the present state of technology and input level, the result of the study suggests that there is plenty of scope to increase the output of wheat commodity by up to 45%. Education, gender, fragmentation (number of wheat plots), and access to input and output markets have negative coefficients in the inefficiency model. In addition to this, the study indicates scaling up/out of best farmers’ practices in the use of recommended integrated soil, water and nutrient management practices is essential for improving the productivity of commercial wheat varieties grown under water-logged vertisols. Furthermore, sharing the benefits of improved technologies through informal education and field days in demonstration plots could be important possible interventions for obtaining maximum achievable wheat yield under the difficult growing conditions of water-logged vertisols in Ethiopia. Key words: Technical inefficiency, stochastic frontier, production function, wheat farmers, Vertisols.

Accounting for slacks to measure and decompose revenue efficiency in the Spanish Designation of Origin wines with DEA

In this paper, we show how Data Envelopment Analysis (DEA) may be used to measure and decompose revenue inefficiency, taking into account all sources of technical waste in the context of an application to assess the Spanish quality wine sector, in particular Designation of Origin (DO) wines. We try to go beyond the standard approaches, which use Shephard distance functions or directional distance functions, to provide decomposition that incorporates slacks as a source of technical inefficiency. To accomplish this, we will base our analysis on a recent approach introduced in Cooper et al. (2011a). In particular, we show how an output-oriented version of the Weighted Additive model can be used to properly identify revenue, technical, and allocative inefficiencies in Spanish DOs. In the application, we conclude that the main source of revenue inefficiency in this sector is technical waste, and that Cava can be highlighted as the DO that performs as a benchmark for more numbers of units.

The effect of work accidents on the efficiency of production in the coal sector

In comparison with other sectors, mining is one of the sectors with the highest rates of work accidents. Such accidents negatively affect a country's economy by wasting domestic resources and causing losses of both labour force and working days. What distinguishes mining from other branches of industry is that its working environments change continually and the working conditions are particularly harsh. Because of the practice of labour-intensive underground production methods, which leads to an increase in risk factors in terms of work accidents, and the fact that coal is a leading resource in meeting the ever-increasing demand for energy, this study investigated how work accidents affected the efficiency of production in the Turkish Hard Coal Enterprise (TTK) between 1987 and 2006. Using data envelopment analysis, the overall sources of technical inefficiency in the years examined were determined. The results from this analysis revealed that the overall technical efficiency was as low as 69.7%, particularly as a result of the disaster in 1992; work accidents therefore had a negative effect on production efficiency. The greatest degree of pure technical inefficiency was found to have occurred in the period between 1992 and 2000, when the highest number of work accidents were noted, whilst the greatest degree of scale inefficiency was found to have occurred between 1987 and 1993. Because TTK has a prominent position among institutions and attaches great importance to workers' health and safety, an increase was noted in efficiency scores after 1993.

DEA와 Tobit 모형을 이용한 대도시 공공도서관의 효율성 영향요인 분석

This paper examines the levels and influence factors on efficiency of public libraries in metropolitan cities. For this purpose, In the first stage, the efficiency score analysis of 129 sample public libraries has been undertaken. In the second stage, the efficiency scores obtained from the first stage are regressed on environmental factors. The result of this study shows that : (1) main source of technical inefficiency is pure technical inefficiency rather than scale inefficiency; (2) it is positive effect environmental factors on the efficiency that the population, the dummy variable of capital area.

Overcoming the limitations of efficiency modeling in the health care foodservice industry

PurposeThis paper aims to reflect on the sources of the technical inefficiency of health care foodservice operations, using a sample of Australian and American hospitals.Design/methodology/approachThe paper applies the stochastic frontier model to reflect on the technical inefficiency and its sources. The advantage of the model is that it allows the simultaneous parameters estimation of technical efficiency as well as the factors that explain variations in technical efficiency. A set of hypotheses are tested to ensure the applicability and suitability of the suggested model. Then the model parameters are estimated, discussed and checked against the theoretical requirements and the literature.FindingsResults show that all the variable coefficients are correctly signed and that the average technical efficiency is around 83 percent for Australia and 80 percent for the USA.Practical implicationsThe technical efficiency results, according to the introduced model, suggest that health care foodservice operations in both countries are not operating at a full efficient level. The results also reveal that factors such as manager's education, manager's experience, and size have a direct impact on reducing the level of technical inefficiency of these operations.Originality/valueThis paper overcomes the limitations of the existing efficiency techniques in the area of health care foodservice and also provides policy implications by emphasizing on the sources of technical inefficiency of health care foodservice operations for Australia and USA.