Stochastic Production Frontier Approach Research Articles

Measuring technical efficiency of the cauliflower cultivation in Bangladesh: A case study on Dhaka district

The research was conducted to explore the technical efficiency of the cauliflower production in Savar and Keraniganj Upazila of Dhaka district, Bangladesh by applying the stochastic production frontier approach. Primary data were collected from 120 households cultivating the cauliflower following the face to face interview by using a structured questionnaire. The estimated results revealed that the mean technical efficiency was 85 % which implies that the household cultivating the cauliflower can increase the revenue by 15 % at given level of resources. Lastly, the inefficiency model suggested that the seedlings of improved varieties, more access to market information, and better training and extension service can minimize the farm level inefficiency.

Instability of Textile Production in Pakistan: Stochastic Frontier Model Approach

Textile industry is the largest industry of Pakistan and like other industries it is facing not only high and escalating cost of electricity and gas but also lack of market access. This study has computed production uncertainty (PU) due to technical inefficiency (TIE) of textile exporting and manufacturing (TEM) firms in Pakistan. We has obtained data from annual reports of 98 companies for the year 2017-18. We has applied stochastic production frontier approach with half normal distribution of ui. PU with confidence bounds had been computed. Inefficiencies (ui/εi) were statistically significant at 5 % level of significance. The mean PU was 0.0045. The computed scores of PU of TEM firms in Pakistan during 2017-18 showed that maximum numbers of firms had their PU score low and close to minimum PU score and very few firms had high PU score and close to maximum PU score. Keywords: Textile Manufacturing Firms, Production Uncertainty, Technical Inefficiency, Confidence Bounds, MLE Technique, Cobb-Douglas Production Function.

Evaluating input use efficiency in shrimp farming by stochastic production frontier approach

Shrimp is the most traded food commodity in the world; the majority of it was sourced from farming. Shrimp farmers need to be technically efficient to be globally competitive. We measured the technical efficiency of shrimp farms with a stochastic production frontier to identify the socio-economic characteristics and input variables that determine it. The model is applied to small-scale shrimp farmers (n = 150) in Nellore District of Andhra Pradesh, India, by using primary survey data that collected through adopting random sampling with the pretested interview schedule. The average technical efficiency score of 0.95 indicated that the farmers were the most efficient. The finding of the technical efficiency score suggests that strengthening the education, experiences, technological adoption and membership of the society could further enhance the shrimp production about 0.44 tons ha−1 with existing technology and alternating inputs.

Dynamics of technical efficiency of sugar mills in India: Stochastic Frontier Approach

Using an annual survey industries unit level data pertaining to year 2014-15 from India, this paper examines the technical efficiency of sugar mills. A Stochastic Production Frontier (SFA) approach has been applied to measure technical efficiency of 490 sugar mills. The empirical results show that on an average sugar mills have 54% technical efficient, despite presence of considerable variations of technical efficiency among the selected states. This paper establishes a repertoire of management regimes varying in technical efficiency. It further reveals a significant difference in organization specific average technical efficiency of sugar mills across states. Overall, sugar mills are running under decreasing returns to scale. The emergent suggestion is to bring improvement in capital input use which is more effective than the labour input and augmentation in liability asset ratio. The management of less efficient mills needs to imbibe the best practices in terms of technology, policy and institutions of more efficient mills operating in other states.

Technical efficiency of sea bass and sea bream farming in the Mediterranean Sea by European firms: A stochastic production frontier (SPF) approach

In recent years, European producers of cultured sea bass and sea bream have experienced a highly competitive market with low prices that have caused profitability challenges. An important factor of economic competitiveness for firms is to produce efficiently. In this paper, technical efficiency of European producers of cultured sea bass and sea bream is evaluated for the period 2008–2017 using the stochastic production frontier (SPF) approach. In addition, the effect of a set of specific-firm factors on firms’ efficiency is investigated. The majority of firms in the sample were found to have a technical efficiency over 90% with Cypriot and Greek firms being, on average, the most efficient. We also found evidence that the technical efficiency of these firms is positively related to their size. Moreover, the high degree of average efficiency means that further production growth requires innovations that move up the production frontier.

Energy Efficiency of Mexican states: A Stochastic Production Frontier Approach

Los objetivos de México de reducir las emisiones de dióxido de carbono y de mejorar la Eficiencia Energética (EE) no pueden lograrse si no se hacen estimaciones de EE. Sin embargo, dada la falta de datos por estado, no hay indicadores por regiones o estados. Utilizando un modelo de Frontera de Producción Estocástica este artículo ofrece una estimación de EE para 29 estados e identifica determinantes de ineficiencia energética. Las conclusiones principales son tres: primero, la mayoría de los estados han mejorado su EE, excepto Jalisco, Baja California y Veracruz; segundo, se identificaron tres variables como determinantes de ineficiencia energética que son: densidad de población, potencial de mercado y alta presencia de la industria de materiales; tercero, el consumo de energía no disminuye con aumentos en el precio. La principal limitación es que, dada la disponibilidad de información, las estimaciones sólo incluyen a la electricidad como fuente primaria de energía.

Economic Efficiency of Smallholder Farmers in Teff Production: The Case of Enemay District, East Gojjam Zone, Amhara Region, Ethiopia

Agriculture remains to be the most important sector of the Ethiopian economy and teff is one of the dominant crops which is produced at less efficient level in the study area. This means that it is possible to obtain additional output from existing inputs used, if resource are properly used and efficiently allocated. The aim of this study was to assess the economic efficiency of smallholder teff producers and identify factors affecting efficiency of smallholder farmers in teff production of Enemay District, Amhara Regional State of Ethiopia. A two-stage sampling technique was employed to select 197 sample farmers who were interviewed using a structured schedule to obtain data pertaining to teff production during 2018/2019 production season. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical, allocative and economic efficiency levels, whereas Tobit model was used to identify factors affecting efficiency levels of the sample farmers. The estimated results showed that the mean technical, allocative and economic efficiencies were 81%, 11% and 9%, respectively which indicates the significant inefficiency in teff production in the study area. Among factors hypothesized to determine the level of efficiencies, education, soil fertility, credit and teff production experience were the positively significant determinants of technical and economic efficiencies of teff producing farmers; while frequency of extension contact had a positive relationship with technical efficiency. In addition, cultivated land determined farmers’ technical, allocative and economic efficiencies negatively and significantly. Whereas distance to market determined technical and economic efficiencies negatively. The result indicated that there is a room to increase the efficiency of teff producers in the study area. Hence, emphasis should be given to improve the efficiency level of those less efficient farmers by adopting the practices of relatively efficient farmers in the area. Beside this, policies and strategies of the government should be directed towards the above mentioned determinants. Keywords: Teff, efficiency, Cobb-Douglas, Stochastic frontier, Tobit DOI: 10.7176/JAAS/68-04 Publication date: September 30 th 2020

Total Factor Productivity Growth, Technological Progress and Technical Efficiency Changes: Productivity Change Dimensions in Tunisia

In this study, we use the stochastic frontier production approach to split the total productivity growth sources into technical progress and technical efficiency changes of the economic sectors in Tunisia between 1961 and 2014. Based on the sectors’ evolution, the analysis is centred on the technological progress trend, the technical efficiency change, and the role of productivity change in the economic growth. The empirical results show that the production factors have a significant effect on productivity. The review of the total factor productivity growth sources reveals that the contribution of technological progress is the main source of this growth.

Technical Efficiency in Honey Production: The Case of Illubabor and Buno Bedelle Zones, South Western Ethiopia

The gap between demand for and supply of food can be reduced by improving productivity either through introduction of modern technologies or improving the efficiency of inputs. However, in developing countries like Ethiopia, improving the efficiency of inputs has received the utmost attention. As production of honey is a significant contributor to the Ethiopian economy, increasing production and productivity of inputs in honey production could be taken as an important step in attaining food security. Therefore, this study was aimed at analyzing the technical efficiency in honey production in Iluabbabor and Bunno Bedelle zones using cross sectional data collected from randomly selected 180 sample households during 2017/18 production season. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical efficiency levels, whereas tobit model was used to identify factors affecting technical efficiency levels of the sample farmers. The estimated results showed that the mean technical efficiency was 51.05% that indicated there was significant inefficiency in honey production in the study areas. The discrepancy ratio (γ), which measures the relative deviation of output from the frontier level due to inefficiency, implied that about 51.05% of the variation in honey production was attributed to technical inefficiency effects. Among factors hypothesized to determine the level of technical efficiency, family size, hive size and experience of household head in honey production were found to determine technical efficiency of farmers positively while distance of household head from the nearest market had negative impact with technical efficiency. The result indicated that there is a room to increase the efficiency of honey producers in the study areas. Hence, the efficiency level of less efficient farmers should be improved by adopting the practices of relatively efficient farmers in the area. Keywords : honey, efficiency, Cobb-Douglas, stochastic frontier, tobit DOI: 10.7176/JAAS/67-03 Publication date: August 31 st 2020

Technical Efficiency of Wheat Producing Farmers in the Case of Bale Zone of Oromia Region, Ethiopia: An Application of Stochastic Frontier Approach

This study was designed to investigate the level of wheat producing farmer’s efficiency and its major determining factors in Bale zone. Both primary and secondary information were collected and multi stage sampling techniques was used to collect the primary information. In the first stage, three woredas were identified purposively for the main reasons that wheat is the most important cereal crops produced in the districts. In the second stage, two administrative kebeles were purposively selected for similar reason of potential wheat production, and in sum 6 administrative kebeles were selected and the total sample size (n) of 344 households was determined. Stochastic production frontier approach was used in this study which Cobb-Douglas production functional was selected for the study. Given the functional form used, estimation procedure implemented, distributional assumption of the inefficient effect, ui, the mean technical efficiency is estimated to be 67%. This value indicates that most farmers are not technically efficient in producing wheat in the study area in that on average they can increase the output they are currently obtaining by 33 percent without increasing the existing level of inputs; labor, area and seed. Education attainment of the household , sex of household head, asset owned , extension contact, membership in iddir, distance to nearby all wheather road, family size,and adption of new variety seed were identified to be the variables significanlty affecting the efficiency of wheat producing farmers . Government should work further to improve educational status of farmers, strengthen the effectiveness of extension services in order to enhance the level of household’s technical efficiency and there should also be effective way to disseminate new variety seeds and new technologies in order to enhance technical efficiency of wheat production. Keywords: efficiency, technical efficiency, wheat production, food security DOI: 10.7176/JESD/11-11-07 Publication date: June 30th 2020

Economic Efficiency in Barely Production: The Case of Chole District, East Arsi Zone, Oromia National Regional State, Ethiopia

As the world’s population grows and the potential to increase production by bringing more resources into use becomes more limited, it is natural that the efficiency with which farmers use available resources would become more important as a topic of investigation. Therefore, this study aimed at analyzing the economic efficiency of barley production in Chole district using cross sectional data collected from 150 randomly selected sample households during 2012/13 production season. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical, allocative and economic efficiency levels, whereas Tobit model was used to identify factors affecting efficiency levels of the sample farmer. The results indicated that there was a significant inefficiency in barley production in the study area. Accordingly, the mean technical, allocative and economic efficiencies of barley producer farmers were 78.20, 46.05 and 35.26 percent, respectively. This implies that output can be increased by 21.8 percent or cost can be reduced by 53.95 percent given the existing level of technology and resources. This inefficiency however, can be improved if factors that determine efficiency level of farmers in the production of barley in the study area are identified and targeted. Results of the Tobit model revealed that age, education, total cultivated land, extension contact, family size, soil fertility, off/non-farm income, sex, crop rotation and livestock ownership positively and significantly affected technical efficiency while land fragmentation and total expenditure had negative and significant effect. Result of the Tobit model also revealed that age, education, total cultivated land, training, crop rotation and livestock ownership positively and significantly affected allocative efficiency while extension contact, land fragmentation, distance of the farm from homestead, and total expenditure were found to have negative and significant effect. Among the factors hypothesized to affect the level of economic efficiency, age, education, training, family size, off/non-farm income, crop rotation and livestock ownership were found to have positive and significant effect on economic efficiency in barley production. The results of the study indicated that there was a room to increase the efficiency of barley producers in the study area through policies and strategies directed towards the above mentioned determinants. Keywords : Cobb-Douglas, stochastic frontier, Tobit. DOI: 10.7176/JRDM/66-03 Publication date: June 30th 2020

Evaluation of technical efficiency of edible oil production: The case of canola production in Kieni West Constituency, Kenya

Globally, the vegetable oil demand is growing due to rising food consumption in emerging countries such as China and due to the high demand for biofuels. The current world vegetable production estimates stand at 187 million tons for the year 2016/2017. Of the estimated vegetable oil production, 70.3 million tons (37.6%) comes from palm and palm kernel, 55 million tons (30%) arise from soybean while the remaining 32.5% are supplied by canola, sunflower, peanut and cottonseed oils. Canola production is becoming an important crop in Kenya due to the high demand for edible oils, with the current production not meeting the current demand. This study evaluates canola production efficiency in Kieni West Constituency and its determinants using a stochastic production frontier approach and a sample of randomly selected 46 canola farmers. The output and input variables measured included the total amount of canola produced, land size under canola production, quantity of canola seeds, labour quantity engaged, and fertilizer quantity. The total input costs and income from canola farming were also evaluated. The mean technical efficiency score was 0.97 with 50% of the farms being efficient. The determinants of canola production included gender of the farmer, age of the farmer, years of schooling of the farmer and number of household members. Canola production was found profitable with the farmers earning an average income of Kshs. 96532.61 (965.32 US$) and a profit of Kshs. 76413.04 (764.13 US$) per season. Thus, the study recommends that there is need for policy makers to promote the crop as an alternative to other crops grown commonly in the area such as maize and coffee which have less return than canola. Measures should specifically be put in place to popularize the crop especially among the younger canola farmers who were found to be more efficient than the older farmers. Seed is also not readily available in Kenya, hence measures that would help farmers’ access high quality canola seeds should be put in place. Key words: Canola, technical efficiency, determinants, Kieni West Constituency.

Innovations and firm-level efficiency: a comparative analysis between China and India

PurposeThis study examines the innovation-efficiency linkage for Indian and Chinese manufacturing and service firms.Design/methodology/approachWe applied the stochastic production and cost frontier approach to determine the output and cost efficiency of the firms surveyed in World Bank enterprise surveys. We then used both unconditional and conditional propensity score matching (PSM) estimation techniques to examine the effects of innovation as well as R&D on output and cost efficiency of the firms surveyed.FindingsThe study results suggest that innovation-efficiency linkage varies between countries and sectors. Innovations significantly raise output and cost efficiency of Indian manufacturing firms, whereas innovations in Chinese manufacturing firms are cost-oriented and negatively affect output efficiency. For the service firms of both countries, innovations are significantly positively linked with output and cost efficiency. The study also suggests that R&D acts as a crucial moderator for innovation-efficiency linkage for Chinese manufacturing firms but not for Indian firms, and the interaction effects of innovations are not substantially higher in magnitude than their individual effects. Finally, conditional PSM results suggest knowledge spillover for effective innovations of Indian firms, whereas R&D is a must for substantial innovation-efficiency linkage in Chinese firms.Originality/valueThis study offers quite a few crucial policy decisions concerning the relationship between innovation and efficiency as well as the moderation effect of R&D on innovation-efficiency linkage. It concludes that the effects of innovation on firms' efficiency and the role of R&D as a moderator of the innovation-efficiency relationship differ between India and China across the manufacturing and service sectors.

Greening Modern Rice Farming Using Vermicompost and Its Impact on Productivity and Efficiency: An Empirical Analysis from Bangladesh

Greening modern rice farming while improving productivity and reducing chemical use is a desirable goal for sustainable agriculture. This paper analyzes the impact of vermicomposting on productivity and efficiency of modern rice farming using a random sample of 340 farmers from the southwestern region of Bangladesh by applying a stochastic production frontier approach. Results reveal that productivity is significantly higher and the use of chemicals is significantly lower for vermicompost users as expected. However, profitability gain is not significantly different mainly due to the high cost of vermicompost. Use of vermicompost significantly increases productivity along with other conventional inputs and its users are relatively more technically efficient. Policy implications include investments to raise farmers’ awareness of the benefits of vermicomposting and support entrepreneurs to expand commercial production of vermicompost, which will synergistically curb the use of chemicals in modern rice farming while improving productivity and efficiency.

Improving livelihoods of smallholder farmers through region specific strategies: a case study of South African sheep production

ABSTRACTThe paper investigates if two groups of smallholder sheep farmers who farm using communal grazing land in the N8 development corridor of South Africa can be treated in a homogenous manner. Heterogeneous production environments should result in different production responses, which are unique to the production region. A better understanding of these unique responses could guide the development of improved strategies to increase smallholder livestock production in South Africa. A stochastic production frontier approach was used to evaluate two production districts before grouping the data and estimating the metafrontier. The metafrontier represents a homogenous benchmark for all producers. Results indicate that the two districts cannot be treated the same. Therefore a single production function and strategy cannot be used to improve productivity and efficiency of livestock production in both the districts. The conclusion is that the development of strategies to increase smallholder sheep producers, productivity and efficiency requires an understanding of the production, environmental and institutional factors that the farmers experience within that particular district. Considering the study areas used in the paper, attention to the more technical aspects of production and management can improve the farmers' productivity and efficiency.

Analisis efisiensi dan skala ekonomi pada industri bumbu masak dan penyedap masakan di Indonesia

The purpose of this study is to determine technical efficiency, alocative/price efficiency and economies efficiency using production factors, and to know about economies of scale of seasoning and flavoring Industry in Indonesia. The data used in this research were secondary data with five digit ISIC (10772) using panel data and for the analytical techniques used in this study include multiple linear regression analysis as production function with stochastic production frontier approach. The result shows that labor production function has positive but insignificant impact on the production, while capital and material has positive and significant impact on the production. The value of technical efficiency is 0,7796 or 77,96% shows that the used of production factors is inefficient technically, the value of alocative/price efficiency is 1,7703 that is mean inefficient, the value of economies efficiency is 1,3801 7703 means that economies efficiency has not achieved the standard yet, and economies of scale is about 1,0203, means that the economies of scale is always increase or commonly known as incresing return to scale but, the value of economies of scale is equal to one, so that the economies of scale can be known as constant return to scale

Determinants of technical efficiency in cotton production in the southern cotton growing zone of Nigeria: A stochastic production frontier approach

Abstract. Olatidoye MS, Alimi T, Akinola AA. 2018. Quality assessment of the physico-chemical properties of vermiwash produced from different sources during successive storage periods. Asian J Agric 2: 58-63. The study investigated on socio-economic factors and estimated the technical efficiency indices and factors influencing technical efficiency of the sampled cotton farmers in the Southern Cotton growing zone of Nigeria. A multistage sampling technique was employed to select a total sample of 300 cotton farmers. The study made use of only primary data which was collected through the aid of a well-structured questionnaire. The data were analyzed using descriptive statistics and stochastic frontier production parametric model. The results of the descriptive statistics showed that majority (83%) of the cotton farmers in the study area were males while the mean age of the respondents was 49 years. The average household size was 8 persons per household and majority (69%) of the respondents had formal education. Majority of the respondents (59%) had no access to credit facilities while majority (80.4%) of the cotton farmers had reasonable years of experience ranging between 11 and above in cotton production. Furthermore, the study found that the technical efficiency of the farmers range from 0.35 and 0.99 with a mean of 0.79. This indicates ample opportunity for farmers to increase their productivity through improvement in their technical efficiency. Seed, fertilizer, pesticides and farm size were found to be statistically significant and positively related to farmers’ output while education, credit, extension contact and farming experience of the respondents negatively influenced farmers’ technical inefficiency. The farmers therefore need to increase their output through more intensive use of seed, land, pesticides and fertilizers.

Regional labour markets in Spain: Can flexibility and local democracy reduce inefficiencies?

AbstractBy applying a stochastic production frontier approach, this paper investigates regional inefficiencies of job creation in Spain over the period 2006–2012. This paper represents a first attempt to test whether a more flexible labour market as designed by the 2010 reform reduces regional inefficiencies. Results suggest that the 2010 reform appears to have improved on average the efficiency of the Spanish labour market even if regional differences persisted over time. The paper also investigates the importance of local democracy for the labour market finding that local democracy positively influences regional efficiency.

ECONOMIC EFFICIENCY OF SMALLHOLDER FARMERS IN WHEAT PRODUCTION: THE CASE OF ABUNA GINDEBERET DISTRICT, WESTERN ETHIOPIA

Yield enhancement through increasing efficiency in cereal production in general and in wheat production in particular could be an important way towards achieving food security. This study was aimed at estimating the levels of technical, allocative and economic efficiencies of smallholder wheat producers; and to identify factors affecting efficiency of smallholder farmers in wheat production. A two stages sampling technique was used to select 152 sample farmers to collect primary data pertaining of 2016/17 production year. Both primary and secondary data sources were used for this study. Stochastic production frontier approach and two limit Tobit model was employed. The stochastic production frontier model indicated that input variables such as mineral fertilizers, land and seed were the significant inputs to increase the quantity of wheat output. The estimated mean values of technical, allocative and economic efficiency were 78, 80 and 63% respectively, which indicate the presence of inefficiency in wheat production in the study area. A two-limit Tobit model result indicated that technical efficiency positively and significantly affected by sex of the household head, education, extension contact, off/non-farm activity and soil fertility but negatively affected by land fragmentation. Similarly, age, education, extension contacts and off/non-farm activity positively and significantly affected allocative efficiency. In addition, economic efficiency positively and significantly affected by sex, age, education, extension contact, off/non-farm activity and soil fertility. The policy measures derived from the results include: expansion of education, strengthening the existing extension services, establish and/or strengthening the existing off/non-farm activities and strengthening soil conservation practices in the study area.

Determining the relationship between ownership and technical efficiency by using a dynamic stochastic production frontier approach

This study adopts dynamic stochastic production frontier approach. Because of the impact of quasi-fixed inputs, airports cannot immediately adjust their production processes. Based on the heterogeneity of public and private airports’ operation models, this study estimates their individual production adjustment speed and their short-run and long-run technical efficiencies to compare transnational airport business performance. The results reveal the differences in the production adjustment of airport groups under different ownerships and performance. Private airports have faster production adjustment, whereas public airports have higher short-run and long-run technical efficiencies. As their primary goal, public airports should strive to increase the elasticity of production adjustment to increase the production adjustment speed, thus improving their long-run technical efficiency. On the other hand, private airports should prioritize eliminating short-run inefficiency to increase their actual output level, thereby improving their long-run technical efficiency.