Stochastic Production Frontier Analysis Research Articles

Voluntary sustainability standards and technical efficiency of Honduran smallholder coffee producers

Sustainable coffee production promises to improve production techniques and enhance the socioeconomic conditions of smallholder farmers. Using primary survey data from 659 coffee producers in Honduras, this study assesses the impact of voluntary sustainability standards (VSS) on the technical efficiency of smallholder coffee production. The article uses the Stochastic Production Frontier Analysis model to analyze and compare the technical efficiency (TE) of certified and non-certified coffee producers. To provide reliable comparability between groups, the dataset was balanced using Covariate Balancing Propensity Score (CBPS). The results show that the mean technical efficiency was 52.86% for pooled certified farmers and 55.56% for non-certified smallholder coffee producers. Specifically, the technical efficiency of 4C farmers was 51.58%, 53.82% for the Fairtrade group, 60.56% for RA farmers, and 60.15% for the UTZ group, indicating substantial inefficiencies in the coffee production of the different certified groups. Results from Tobit’s model for the determinants of TE indicated that variables such as the age of the household head, access to credit, and training attendance are among the main factors that significantly drive the technical efficiency of certified and non-certified farmers. Based on the findings, enhancing education opportunities, improving infrastructure for better market access and farm management, and expanding credit access are recommended to improve efficiency in the study area. Honduran smallholder coffee producers have considerable potential to increase output with existing technology by improving their technical efficiency. Therefore, stakeholders’ efforts should focus on enhancing efficiency levels and capitalizing on potential gains for both certified and non-certified farmers, to ultimately improve the farmers’ livelihoods.

Stochastic Production Frontier Analysis and Technical Efficiency of Yellow Yam (Dioscorea cayenensis) Farmers in Orhiowmon Local Government Area of Edo State, Nigeria

Stochastic Production Frontier Analysis and Technical Efficiency of Yellow Yam (Dioscorea cayenensis) Farmers in Orhiowmon Local Government Area of Edo State, Nigeria

Interstate Disparity in Combating COVID-19 in India: Efficiency Estimate Across States

Currently, COVID-19 is the most lethal menace in the world. Due to its health and economic consequences, it becomes a serious challenge for the economy. The present article aims to explore India’s interstate disparities of efficiency in combating COVID-19 based on secondary data. Besides, an attempt has been made to pinpoint the factors responsible for the inefficiency of resisting this deadly virus. The interstate efficiency measurement is facilitated by applying stochastic production frontier analysis. The empirical result divulges that among the Indian states, Bihar is the most efficient in combating COVID-19. The empirical estimation of the frontier model discloses that the number of doctors, nurses, police force, isolation beds and hotspots positively and significantly influence the recovery rate from COVID-19 in Indian states. The empirical results of the inefficiency effects model suggest that the share of elderly and urbanisation reversely influence the efficiency in combating the virus, while favourable sex ratio, literacy rate, regular salaried employment, digitalisation and ruralisation stimulate the efficiency of the concerned state. The study concludes that efficient utilisation, coupled with the advancement of the existing health infrastructure, is imperative for the acceleration of the recovery rate from this pandemic.

A Stochastic Production Frontier Analysis of Factors That Affect Productivity and Efficiency of Logging Businesses in Virginia

Abstract Understanding the effect of the relationship between timber harvesting attributes on loggers’ productivity and efficiency is crucial for the feasibility and expansion of sustainable forest management and logging. We applied a stochastic production frontier model to firm-level operational data collected from 202 loggers in Virginia, United States, in 2019. Logging equipment value, physiographic region, tract area, number of workers and crews in the woods, college education level, and harvest type statistically increase harvesting productivity. Harvesting productivity in the Coastal Plain was the greatest of all physiographic regions, and pine clearcut productivity was statistically greater than that of hardwood thinning. On the other hand, manual felling reduces harvesting productivity. We found an average efficiency rate of 67% among firms in our sample, which is similar to that found in the literature. The estimated values can show factors that improve forest harvest productivity through better planning and investments while improving the sustainable use of inputs and resources. Study Implications: We empirically analyzed factors affecting logging productivity and efficiency in the southern US state of Virginia. Increased productivity was associated with working in the Coastal Plain physiographic region, investing in logging equipment, increasing the number of workers and crews in the woods, increasing pine clearcut as opposed to hardwood thinning, choosing optimal harvesting tract size, and having a college education as opposed to no high school degree. Manual felling reduces harvesting productivity, and average BMP implementation time does not affect harvesting productivity. Our results can be used as a guide in planning future decisions to increase logging productivity.

Nonlinear Effects in the Asymmetric Copula-Based Stochastic Frontier Model

Several stochastic frontier production analysis problems are not linear regression problems; two error components (inefficiency and noise) may not have symmetric dependence. In nonlinear problems, the data are divided into two or more regimes according to turning points or change points; the relationships between the output and all the inputs are allowed to differ between regimes. In the problem of two-error dependence, the inefficiency component generally plays a more dominant role than the noise component, thereby the output of each firm is mainly influenced by the inefficiency; in such cases, the symmetric dependence is not suitable. It is, therefore, desirable to come up with a new nonlinear asymmetric copula-based stochastic frontier model (SFM). Two nonlinear structures, namely kink and threshold and skew-normal copula, are suggested to SFM to deal with these problems. The Monte Carlo simulations and analysis of a real data set are employed to evaluate the accuracy and performance of proposed models. The results show that the proposed models show a higher performance when compared with the conventional linear SFM with symmetric two-error dependence.

Patterns of Innovation and Firms’ Efficiency in Case of Indian Manufacturing Sector

This study examines the linkage between patterns of innovation and firms’ efficiency of Indian manufacturing sector. The results based on primary survey show that firms which have either introduced new products or improved their products through process innovation are relatively efficient. Further, by employing a stochastic production frontier analysis, the study finds that firms those are engaged in various patterns of innovation are more technically efficient. We also find that firms’ age, capital intensity, skilled workforce and capital-output ratio are key factors that affect the technical efficiency of these innovative firms.

Determinants of technical efficiency of smallholder farmers’ bread wheat production and implications of seed recycling: A stochastic frontier approach

Background: Due to decreasing productivity trends, enhancing farm level technical efficiency (TE) in bread wheat production (BWP) is central to Ethiopia's food security strategy. This requires increased BW productivity through the use of improvements in seeds and TE. However, there is some empirical research that examines the institutional, socio-demographic, economic, and agronomic determinants of the TE of BWP simultaneously. Therefore, the purpose of this study was to analyze determinants of TE and the implication of seed recycling on TE. Methods: The data was gathered from 450 randomly selected sample respondents via structured interviews, focus groups, and interviews with key informants. Data collection took place from December 15, 2021 to January 15, 2022. BW growing smallholder farmers were the major respondent of the study. Quantitative type of data including the number of inputs used, amount of wheat produced, and socio – demographic, economic, agronomic, and institutional variables were gathered and analyzed. The TE and factors affecting it were examined using a stochastic frontier production analysis with a trans-log functional specification. Results: The coefficients for labour (0.086), capital (0.22), fertilizer (0.042), weedicide (0.014), and machinery (0.005) were significantly positive at p<0.001 implying that an optimum increase to these inputs would increase BWP. The mean TE was found to be 79.99% indicating that farmers in the study operate 20.01% less than their potential. Nine of the hypothesized variables (69.2%) had significantly affected TE. Moreover, seed recycling reduced TE by 2.34%. Conclusion: Findings suggest that few farmers are able to grow BW either on the frontier or very close to it, which denotes high TE and poor access to improved seeds leading to seed recycling. Therefore, the farmer-to-farmer (F2F) extension method, which enables farmers to learn from their neighbors and create wider access to improved seeds through seed loans and vouchers are strongly suggested.

Firm Ownership and Technical Efficiency: Production Frontier Analysis of Malaysian Manufacturing

Using a new micro-based dataset of 8,472 firms covering 19 industries, this paper employs a stochastic production frontier analysis to compare time-varying technical efficiencies of foreign firms vis-à-vis local firms for the 2014 to 2019 period. The empirical findings indicate that on average, foreign firms are only marginally more (technically) efficient than local firms even after controlling for other firm characteristics. The productivity levels between foreign firms and local firms are also somewhat comparable for ‘catalytic’ industries, electrical and electronics, machinery, and chemicals. Together these results confirm that the high productivity gaps between the foreign firms and local firms in the Malaysian manufacturing sector seem to be a thing of the past.

Agricultural Productivity, Efficiency, and Rural Poverty in Irrigated Pakistan: A Stochastic Production Frontier Analysis

The main objective of this study is to estimate the input elasticities of production for poor and non-poor farms. The study estimates the stochastic frontier production function. The results show that the elasticities of production differ for poor and non-poor farms. The production elasticity of land is substantially higher on rich farms as compared to the farms belonging to poor farmers. This implies higher returns on investment on land by the rich farmers. The salinity/sodicity problem and the tail-end location of the plot adversely affect farm productivity and efficiency, particularly at the poor farms. Moreover, the average cost of the existence of technical inefficiencies is about 43 percent in terms of loss in output, with wide variations across farms ranging from 17 percent to 62 percent. The study further concludes that the least efficient group is not only operating far below the frontier but it also operates at the lower portion of the production frontier. Consequently, increasing access to the inputs would likely raise productivity and reduce poverty. The results imply that the land distribution using the notion of land reforms in favour of poor/small farmers in the presence of existing farm structure, rural infrastructure, and the weak farm-supporting institutions is not expected to raise farm productivity and reduce poverty among the poor farmers. The results call for a strong and active role of the government in close partnership with the private sector to initiate income-generating activities and inputs supply chains in the rural areas to break the nexus of poverty, land degradation, and low agricultural productivity.

Do Government Expenditures in G7 Countries Target Socioeconomics or Physical Output?

The issue of valuable government policy interventions has not been fully addressed. Therefore, this paper analyzes the impact of government capital expenditure on production efficiency in the G7 countries. Two models are estimated with different dependent variables: the Human Development Index (HDI) as a dependent variable to capture the socio-economic impact and the gross domestic product (GDP) as a dependent variable to capture the physical impact. The paper uses a set of panel data for the G7 countries spanning the years 2000–2018, which were obtained from the World Development Indicators (WDI) database. The paper applies stochastic production frontier analysis (SFA) to estimate each country’s yearly efficiency and to estimate the impact of government expenditure on the overall technical inefficiency for both models. The results demonstrate that increasing government expenditure boosts the inefficiency in the G7 countries in the HDI model, but it depresses inefficiency in the GDP model. This may suggest that government capital expenditure in the G7 countries was directed toward increasing physical output—not toward socio-economic outputs such as health and educational output—during the study period. Furthermore, the results show that the estimated average technical efficiency over the study period was 93.4% for the HDI model and 81.2% for the GDP model. Finally, the results show that the G7 countries’ objectives were not similar in this area, with some countries using socioeconomic-oriented policies and others using physical-capital-oriented policies.

Technical Efficiency Analysis of Layer and Broiler Poultry Farmers in Pakistan

Achieving high production with limited resources is a major challenge faced by poultry farmers in countries with developing economies, such as Pakistan. Optimization of the technical efficiency (TE) of poultry business operations is a promising strategy. A representative sample of 210 poultry farms in the province of Punjab in Pakistan was analyzed for TE. The studied sample comprised 105 layer chicken farms (battery cage system, egg production) and 105 broiler chicken farms (environmental control shed system, meat production). A Cobb–Douglas stochastic frontier production analysis approach with the inefficiency effect model was used to simultaneously estimate TE levels and identify factors that influence efficiency. The results indicated that flock size, labor, feed, and water consumption are positively related to egg production, whereas vaccination was found to be insignificant. For broiler businesses, flock size, feed, and water consumption were positively related to the output, whereas labor and vaccination were found to be insignificant. The results of the TE inefficiency effect model revealed that farmer age, education, experience, access to credit, and access to extension services all had a significant and positive influence on the technical efficiency of both layer and broiler farmers. The estimated mean TE level of layer and broiler poultry farmers was 89% and 92%, respectively, evaluated against the benchmark of the identified frontier of efficient production with prevailing systems. The study concludes that it is possible to increase egg production by 11% and meat production by 8% by making more efficient use of the available resources and technology. To improve poultry farmers’ efficiency, policy interventions should focus more on the pronounced effects of variables such as education, farmer experience, credit access, and extension services.

The FDI Spillover Effect on the Efficiency and Productivity of Manufacturing Firms: Its Implication on Open Innovation

In this study, we investigated the effects of foreign direct investment (FDI) spillovers on firm production and technical efficiency in Indonesia’s manufacturing sector from 2010 to 2015. We scrutinized three different channels of horizontal spillover, namely, demonstration, technology adoption, and competition channels. We also captured the heterogeneous effect of firms by categorizing them based on their technological intensity (low, medium, or high). Using time-varying stochastic production frontier analysis, we found that manufacturing firms in each technological group benefit from FDI, either from productivity improvement or technical efficiency improvement. High-technology firms mainly benefit from FDI due to their high technological absorption capability. Meanwhile, medium-high and medium-low tech firms increase productivity through the demonstration effect and the technology adoption channel, despite underperforming in technical efficiency. Finally, low-tech firms, which primarily employ unskilled workers, suffer from large inefficiency. We found that increased FDI, combined with improvements in technology absorption capacity, can help revitalize the productivity of low-tech firms. FDI, firm size, and access to foreign inputs all support production effects but have no direct positive impact on firms’ technical efficiency. The results of this study suggest that the government should ensure that domestic firms can absorb the technical capability of a foreign presence. Open innovation can help strengthen foreign–domestic linkages to contribute to growth through the transfer of knowledge, skills, and technologies.

Enhancing Technical Efficiency and Economic Welfare: A Case Study of Smallholder Potato Farming in the Western Highlands of Guatemala

Smallholder farmers in the Western Highlands of Guatemala grow potatoes for subsistence and as a cash crop but their current productivity is 29% lower than the world average. The objective of this study is to provide policy recommendations for improving potato productivity through enhancing technical efficiency in smallholder potato farming in the Western Highlands of Guatemala. In doing so, this study examines the determinants of potato productivity and identifies the sources of technical inefficiency in smallholder potato farming. In addition, the study evaluates the economic welfare impact of potato farm operations and provides policy recommendations for increasing smallholder potato productivity through enhancing technical efficiency. Stochastic production frontier analysis showed that on average farmers are at 57% efficiency. Hence, there is a considerable room for improving efficiency in potato farming. The sources of inefficiency of the farmers were determined to be caused by higher elevation, smaller farm size, and location of the farms. Welfare gains from reaching potential efficiency is US$ 8.79 million in terms of producer surplus per year in Guatemala. Hence, this study provides valuable information for policy makers and farmers for improving technical efficiency and producer surplus. Likewise, providing better conservation practices by extension will ameliorate the low productivity associated with higher elevation and locations that are lower in technical efficiency.

Investigating the Link Between Human Health and Technical Efficiency: A Case Study of Oil Palm Processors in Nigeria

The relationship between health status and technical efficiency cannot be over-emphasized although most researchers in the past have failed to recognize the possibility of an existing relationship between these variables. This study examined the cost implication of illnesses and their effect on the technical efficiency of oil palm processors in Edo State. A multistage sampling procedure was used to select 210 oil palm fruit processors in the study area. Data were analyzed using frequency counts, percentages, Cost-of-Illness estimation and Stochastic Production Frontier Analysis (SPF). Results revealed that the major illnesses experienced by the processors were malaria (100.0%), cough and catarrh (100.0%), back pain (98.8%), skin rash (78.9%) and nausea (76.6%). The estimated cost of illness was N165,338.80 with total time cost contributing 97.02% of this value for the period under consideration. SPF revealed that the mean technical efficiency of the oil palm processors was 0.75. Furthermore, palm fruits (β = 0.662, p<0.01), the volume of water used (β = 0.180, p<0.05), labor (β = 0.415, p<0.01) and processing experience (β = -0.110, p<0.05) increased the production of palm oil, while days of incapacitation (β = 0.445, p<0.01) increased technical inefficiency. The study concluded that illnesses had a negative influence on the technical efficiency of oil palm processors. The study recommended that stakeholders should create awareness of a healthy lifestyle and practical ways to maintain good health while ensuring continuous production.

Measuring the economic efficiency performance in Latin American and Caribbean countries: An empirical evidence from stochastic production frontier and data envelopment analysis

The development of the global economy has raised concerns about economic efficiency and productivity. In this context, understanding the concepts of economic efficiency and productivity and the knowledge of the techniques available for their measurement are also of fundamental importance. Thus, the objective of the present study is to measure the economic efficiency performance of 14 countries from the Latin America and the Caribbean (LAC) region in the period from 1990 to 2017. Analysing the economic performance of these countries with linear Cobb-Douglas production function, two methods were used: the parametric stochastic frontier analysis (SFA) and non-parametric data envelopment analysis (DEA). Both approaches (SFA and DEA) show that Panama is the most economically efficient country in the LAC region, followed by Chile. Concerning other countries, the choice between the SFA and DEA models affects the ratings. Results indicate that Brazil (SFA) and Nicaragua (DAE) are the least economically efficient LAC countries.

An Analysis of Technical Efficiency of Vegetables’ Household Production in Mongolia

Vegetable production is one important agricultural product in crop production after wheat and potatoes production in Mongolia. Currently, household production dominates in total vegetable production (approximately 80 percent). Thus, the purposes of this paper were to measure technical efficiency and to determine influencing factors inefficiency on vegetable household production in Mongolia by using Stochastic production frontier analysis (SFA). Primary data was collected from randomly selected 260 vegetable households of Mongolia in 2019. The empirical result indicated that the average technical efficiency of the sampled vegetable household was 64.6 % (range between 43.2% and 99.9%) or they lost about 35.4% of the potential output due to technical inefficiency. We found that land and labor are the main influencing input factors of the household’s vegetable production. Also, the result of the technical inefficiency model, variables of age, sex, experience, and credit use obtained a negative relationship with inefficiency. The other variables are family size, education level, land fragmentation index was positively affected by technical inefficiency.

Prospek Swasembada Beras di Provinsi Kalimantan Timur

Rice self-sufficiency in Indonesia remains a national priority program since rice is a staple food of the majority of the population. This national program has become an economic development agenda in almost all local governments at the provincial and district levels. East Kalimantan Province is one of the provinces that set the rice self-sufficiency on the local medium-term planning (RPJMD) 2013-2018. This research generally aimed at analyzing the prospect of rice self-sufficiency in East Kalimantan Province. Specifically, the research aimed to measure the potential for developing rice in East Kalimantan Province and to analyze the production technical efficiency of rice farming. The data used in this research were national and provincial agriculture land area and 337 units of rice farm from Agricultural Census 2013. Using LQ (Location Quotient) method indicated that economically rice was not a basic commodity of East Kalimantan Province. At the provincial level, there were only two out of four districts that had rice as a basic commodity. Stochastic production frontier analysis showed that the technical efficiency of rice production was 0.64, which indicated that rice production in the province was 36 per cent below its production frontier. Planting patterns and land status significantly improved technical efficiency. From this research can be concluded that the self-sufficiency program in East Kalimantan Province was not supported by regional potential of rice production nor by technically efficient rice production at the farm level.

Does a Diversified Crop Portfolio Make Farmers More Efficient? A Stochastic Production Frontier Analysis of Farm-level Data from Assam, India

The agriculture sector in India is beset with twin limitations of shrinking cultivable area and absence of major technological breakthroughs in the recent past. In such a situation, a judicious management of the farm in the form of adjustment in a crop portfolio can be quite useful to maximise output and minimise wastage of resources. This article seeks to examine whether a diversified crop portfolio makes the farmers more efficient using farm-level survey data collected from geographically diverse areas of Assam, a state in northeast India. The results of a stochastic production frontier analysis show that adoption of a diversified crop portfolio across crops and seasons makes the farmers more efficient in cultivation by helping them reduce weather-induced damages to crops and reap better returns from farming. This efficiency-enhancing effect of crop diversification is found to be heterogeneous among the regions. However, too much diversification reduces the efficiency of farmers. The results have important implications for Assam where floods cause extensive damage to crops every year. Moreover, access to extension services and government support are found to make the farmers more efficient. On the other hand, fixed-rent form of tenancy reduces efficiency of the farmers while household size has a positive impact on the same.

Influence of socio‐economic factors and environmental hazards on technical efficiency of shrimp farms: A stochastic frontier production analysis

Shrimp farming is a key component of Vietnamese aquaculture contributing ~5% to their gross domestic product annually. Environmental hazards and socio-economic parameters among other factors influence shrimp productivity in Vietnam. The present study employed the stochastic frontier production approach to investigate how technical efficiency (TE) of semi-intensive and intensive shrimp farms is influenced by socio-economic factors and environmental hazards. A questionnaire was administered to ascertain farmers' cost of major inputs (labour, seed, feed and lime), socio-economic factors, coupled with environmental hazards (flood, pollution and drought experience). Findings revealed a mean TE of approximately 65% and 76% for semi-intensive and intensive farms respectively (though, non-significant as p ≥ 0.05). The input variables, shrimp seeds, feed and lime were found to be important variables in the intensive systems, as they positively correlated with TE in intensive systems. In the inefficiency model, education positively correlated with the TE in both systems, indicating that educated farmers are more efficient. Pollution negatively correlated with TE in both systems. With <80% of the farmers extremely affected by floods and droughts, and about 95% affected by pollution, the present study concludes there is a thorough impact of the above environmental hazards on farmers' technical efficiency.

Technical efficiency of smallholder honey farmers in Jimma zone, Ethiopia

This study analyzes technical efficiency and determinants of the efficiency of honey production in the Gomma and Gera districts of the Jimma zone. The data were obtained from 194 randomly selected honey-producing smallholder farmers. A Cobb - Douglas stochastic frontier production analysis with the inefficiency effect model was used to estimate technical efficiency and identify the determinants of efficiency variations among honey farmers. The study showed that several hives and supplementary feeds positively and significantly influenced honey yield. This shows that there is room to increase honey productivity from the current level if farmers can efficiently use these input variables. The result further showed that there were differences in technical efficiency among honey producers in the study area. The discrepancy ratio, γ, which measures the relative deviation of output from the frontier level due to inefficiency, was about 84%. This implies that about 84% of the variation in honey output among the farmers was attributed to technical inefficiency effects. The estimated mean level of technical efficiency of honey producers was about 74%. This reveals that there is a possibility to increase the level of honey output by about 26% through exploiting the existing local practices and technical knowledge of the relatively efficient farmers. The education level of the farmer, landholding, income, extension contact, and training were found to determine technical efficiency significantly. Therefore, the concerned sector should focus on the above variables to enhance the technical efficiency of honey producers in the study area.