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Technical Efficiency of Chili Production

A. S. M. Anwarul Huq
Institute of Agricultural and Food Policy Studies, University Putra Malaysia, Putra Infoport, 43400 Serdang, Selangor Darul Ehsan, Malaysia

Fatimah Mohamed Arshad
Institute of Agricultural and Food Policy Studies, University Putra Malaysia, Putra Infoport, 43400 Serdang, Selangor Darul Ehsan, Malaysia

Abstract/ Executive Summary:

Scarcity of resources has led to production economists to think about the reallocation of existing resources to produce a prescribed level of output with the minimum cost without changing the production technology. But there is a lack of information about the efficient use of inputs in chili production. Except for a few descriptive studies, econometric analysis has yet to be conducted to examine the production function for chili cultivation and its potential for future improvement in Bangladesh. Approach: In this study an effort was made to assess the level of technical efficiency required for chili production in the administrative district of Jamalpur and also analyzed the status of resource allocation for its production. The Cobb-Douglas stochastic production frontier model was used to analyze the data. Results: The study revealed that cultivation of chili is highly profitable. The net return against cultivating of chili was Tk 73,164 ha^-1 while the Benefit Cost Ratio (BCR) was 1.93. However, all the farmers were not very close to the maximum frontier outputs (efficiency levels varying from 11-96% and their mean efficiency was 77%). Conclusion: On an average, 23% technical inefficiency appears which implies that the output per farm can be increased on an average by 23% through chili production using the prevailing technology and without incurring any additional production cost. Side by side advanced technology (high yielding variety, disease and pest management) could be adapted to increase production of this particular spice.

Keywords: Technical efficiency, Chili

Location: Sadar Upazila of Jamalpur districts, Bangladesh.

Start Date: 00-00-2008

End Date: 00-00-2009

Program Area: Crop-Soil-Water Management

Commodity: Chilli

Objectives:

To determine the level of technical efficiency of the chili producing farmers and to analyze the status of resource allocation.

Methodology:

Jamalpur district as an important chili growing area, which was selected purposively for the present study. Six villages were selected from Sadar Upazila of Jamalpur districts, where it is cultivated extensively. A total of 100 chili growers were selected. Simple random sampling technique was used to select the farmers. Data were collected by visiting each farm personally and by interviewing them with the help of a pre-tested interview schedule. The reference period for the survey was 2008-09. Analytical Framework: The stochastic production frontier and technical inefficiency modelwere taken. Empirical model of stochastic frontier: In order to estimate the level of technical efficiency in a manner consistent with the theory of production function, Cobb-Douglas type stochastic frontier production function was used in the present study. The Cobb-Douglas form of production function has some well-known properties that justify its wide application in economic literature (Henderson and Quandt, 1980). It is a homogeneous function that provides a scale factor enabling one to measure the return to scale and to interpret the elasticity coefficients with relative ease. It is also easy to estimate and mathematically manipulate. At the same time, the Cobb-Douglas production function makes several restrictive assumptions. It is assumed that the elasticity coefficients are constant, implying constant share for the inputs. The elasticity of substitution among factors is unity in the Cobb-Douglas form. Moreover, this being linear in logarithm, output is zero if any of the inputs is zero and output expansion path is assumed to pass through the origin. However, it is also argued that if interest rests on efficiency measurements and not on an analysis of the general structure of the underlying production technology, the Cobb-Douglas specification provides an adequate representation of the production technology. In addition, its simplicity and widespread use in agricultural economics outweigh its drawbacks. Translog stochastic production function is also used to estimate the significant relation of different variables which in turn affects the level of efficiency. Translog function is a flexible functional form. But it is more difficult to mathematically manipulate and can suffer from degree of freedom and multicollinearity problems (Rahman, 2002). However, large sample size is needed for Translog functional form. Total sample size of the present study was 100, which may be considered not large enough for Translog functional form. In consideration of the above fact, Cobb-Douglas type functional form had been tried in this study.

Source of Information: American Journal of Applied Sciences 7 (2): 185-190, 2010; ISSN 1546-9239

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

It is apparent from the above discussion that cultivation of chili was highly profitable in Jamalpur district. Although, a huge amount of cash was needed for cultivation of this crop, farmers could obtain higher amount of profit. Seed, human labor and irrigation cost were identified as important factors for the increase of chili production. Present study reveals that for chili all of the farmers were found to have produced outputs which were not very close to the maximum frontier outputs (efficiency levels varying from 11-96% and their mean efficiency was 77%). On average, 23% technical inefficiencies appears, which implies that the output per farm could be increased on average by 23% for chili production under the prevailing technology without incurring any additional production costs. Side by side advanced technology (high yielding variety, disease and pest management) could be adapted to increase production of this spice. It tends to suggest that the research for the development of improved varieties of chili should be undertaken in the long run. The models for the technical inefficiency effects in the stochastic production frontiers included age, education and farm size. Technical efficiency increase as farmers’ formal education increases. Education should be one of the top priorities to develop the necessary human capital for sustainable development. Younger farmers need to train up to increase their efficiency.

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