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Measurement of Economic Efficiency in the Production of Rice in Bangladesh - a Translog Stochastic Cost Frontier Analysis

K. M. Mostafizur Rahman
Assistant Professor
Assistant Professor of Agricultural Statistics, Bangladesh Agricultural University, Mymensingh,Bangladesh.

Peter Michael Schmitz
Professor
Professor of Agricultural Policy and Marketing Research and Dean of the Faculty of Agriculture, Justus-Liebig-University Giessen, Germany.

Tobias C. Wronka
Ph. D. student
Ph. D. student of the Institute of Agricultural Policy and Marketing Research, Justus-Liebig-University Giessen, Germany.

Abstract/ Executive Summary:

A Translog stochastic cost frontier has been estimated simultaneously with the economic inefficiency effect model using maximum likelihood for different rice crops. To estimate farm-specific economic efficiencies, single estimation of Translog cost frontier has also been done. Different cost components and their interactions are found to have different impacts on the stochastic cost frontier for different rice crops. The study reveals that there are significant economic inefficiency effect in the production of all rice crops and extension contact has negative impact on the economic inefficiency effect for all rice crops whereas experience has negative impact on the economic inefficiency effect for Boro and Aman rice. For Aus rice, education has positive impact on the economic inefficiency effect. The mean economic efficiencies estimated from Translog cost frontiers for Boro, Aus, and Aman rice are respectively 80%, 60% and 74%. The study also reveals that without change of output the production cost of Boro, Aus and Ainan can be reduced by 20%, 40% and 26%, respectively.

Keywords: Economic efficiency,Production of rice

Location: Brahmanbaria, Mymensingh and Dinajpu

Start Date: 00-07-1998

End Date: 00-06-1999

Program Area: Socio-economic and Policy

Commodity: Rice

Objectives:

(i) To develop a specification and estimation for a Translog stochastic cost frontier model;

(ii) To estimate farm-specific economic efficiencies for individual sample farmers

(iii) To identify the factors causing variations in economic inefficiency effects (or economic efficiencies) among the sample farmers.

Methodology:

Data: The three regions, that is, Brahmanbaria, Mymensingh and Dinajpur were selected purposively considering the relative importance of these regions in producing rice. These three great regions (old district) produce about 16 percent of total rice in Bangladesh (BBS 1998). Considering their contribution to the total output, the selection of these regions was appropriate for a study on the efficiency of rice production. Moreover, the soil texture of these regions represents a good cross section of the soil texture of the country. Farmers of these regions are familiar with new inputs of production such as HYV seeds, artificial irrigation, chemical fertilizer etc. for several years and in these regions there are the requisite number of households with different farm sizes. The regions are also relatively easily accessible and well communicated. Since Dinajpur is the north-west district of the country, Mymensingh is the middle district and Brahmanbaria is the south-east district, the selection of these areas was uniform on the spatial context. To collect the primary data from the farmers of Bangladesh, probability sampling technique was adopted. At first a sampling frame of farmers was constructed with the help of village leaders and some other relevant persons. The villages were selected with simple random sampling technique but the farmers were selected with stratified random sampling with arbitrary allocation. The data were collected for the crop year July 1998 to June 1999. The sample was composed of small (below 1.00 hectare), medium (1.00 - 3.00 hectares) and large (above 3.00 hectares) farms. Within the sample, 50 percent were small, 30 percent were medium and 20 percent were large farmers. Five hundred farmers in total were interviewed in this study. Of the five hundred sampled farmers, 300 farmers had direct contact with extension workers and were selected 100 from each region to ascertain the importance of extension service in Bangladesh. Another 200 farmers who had no relationship with the extension workers were selected, 100 from each region except Mymensingh region. For the region Mymensingh, only a sample of 100 farmers with access to the extension service was selected but no sample of non-extension farmers was selected because there is one agricultural university known as Bangladesh Agricultural University and from this university every year several extension programmes are carried out in this region side by side with government extension programmes. Thus most of the farmers in this region are connected to extension programmes. To compare the productivities and efficiencies between farmers with extension services and farmers without extension services, these two types of data are very useful.

Source of Information: Bangladesh J. Agric. Econs. XXIII, 1 & 2(2000) 35-49

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

The study revealed that there were significant economic inefficiency effect in the production of all rice crops and extension contact has negative impact on the economic inefficiency effect for all rice crops whereas experience has negative impact on the economic inefficiency effect for Boro and Aman rice. For Aus rice, education has positive impact on the economic inefficiency effect. The mean economic efficiencies estimated from Translog cost frontiers for Boro, Aus, and Aman rice are respectively 80%, 60% and 74%. The study also reveals that without change of output the production cost of Boro, Aus and Ainan can be reduced by 20%, 40% and 26%, respectively.

Knowledge Management: Journal