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Farm-size-specific Technical Efficiency: a Stochastic Frontier Analysis for Rice Growers in Bangladesh

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

M. I. Mia
Professorss
Professor, Department of Agribusiness and Marketing, Bangladesh Agricultural University, Mymensingh

M. A. Alam
Assistant Professor
Assistant Professor, Department of Agricultural Statistics, Bangladesh Agricultural University, Mymensingh

Abstract/ Executive Summary:

The study was conducted during 2008-2009 to estimate the farm-size-specific technical efficiency of rice growers. The technical efficiency scores were estimated using stochastic production frontiers. The large farms received the highest yield (4772.83 kg) per hectare while marginal farms received the lowest yield (4610.53 kg). Gross return was found to be the highest for small farms and net return was the highest for marginal farms. The marginal farm experienced the highest benefit-cost ratio (BCR) followed by small, medium and large farm respectively. The average technical efficiency for large, medium, small, marginal and all farms were respectively 0.88, 0.92, 0.94, 0.75 and 0.88. There was significant technical inefficiency in the production of rice for marginal farms indicating that production could be increased by increasing efficiency with the existing technology for marginal farms. Farm management could help in increasing production in marginal farms. For other farms, increased managerial capacity was not enough for increasing production. New investment and advanced technology were needed to increase production in these farms. Farmers could increase 12 percent output with application of inputs and production technology at the aggregate level. The costs of fertilizer, manure, irrigation, insecticide and area and experience were important factors to increase production. Age, education and family size had negative impact on technical inefficiency whereas land had positive impact on technical inefficiency.

Keywords: Farm size, Technical efficiency,Stochastic frontier analysis,Rice growers

Location: Dinajpur, Rangpur, Bogra, Rajshahi, Natore, Naogaon, Mymensingh, Sherpur, Kishoregonj, Sylhet, Camilla, Chittagong, Jessore and Barisal.

Start Date: 00-00-2008

End Date: 00-00-2009

Program Area: Socio-economic and Policy

Commodity: Rice

Objectives:

1.To develop a specification and estimation for a stochastic frontier model to estimate farm-size-specific technical efficiency,

2.To identify the factors causing variations in technical inefficiency effects (or technical efficiencies) among the sample farmers and also to implicate certain development policy.

Methodology:

Data: The data were collected from 1360 farmers interviewing them directly using a pretested questionnaire from 14 districts across Bangladesh. The districts were Dinajpur, Rangpur, Bogra, Rajshahi, Natore, Naogaon, Mymensingh, Sherpur, Kishoregonj, Sylhet, Camilla, Chittagong, Jessore and Barisal. The motivation of data collection was to accomplish a FAO funded research project. The selection of the districts was purposive considering them as major rice growing districts that contributed to about 16 percent of total rice production (BBS, 2008). But the selection of farmers of different categories was performed using stratified random sampling technique. The study was involved in four categories of farm households. These were marginal farm owning less than 50 decimals, small farm owning up to 249 decimals, medium farm up to 750 decimals and large farm owning above 750 decimals of land. Of the 1360 farm households, 138 households were selected from large, 416 households from medium, 440 households from small and 366 from marginal households. Some trained field enumerators collected the data during the crop year 2008 to 2009. Model Specification In order to estimate the level of technical efficiency in a way consistent with the theory of production function a Cobb-Douglas type stochastic frontier production function was specified. The Cobb-Douglas form of production function has properties that justify its wide application in economic literature (Henderson and Quandt 1971). It is a homogeneous function that provides a scale factor enabling to measure the returns to scale and to interpret the elasticity coefficients with relative ease. The function is easy to estimate and manipulate mathematically. The Cobb- Douglas production function works under several restrictive assumptions. Firstly, it assumes that the elasticity coefficients are constant, implying constant shares for the inputs. Secondly, it assumes that elasticity of substitution among factors is unity. Moreover, the function being linear in logarithm, the output is zero if any of the inputs is zero, and the output expansion path is assumed to pass through the origin. It is argued that if interest rests on efficiency measurements and not on analysis of general structure of the underlying production technology, the Cobb- Douglas specification provides an adequate representation of production technology.

Source of Information: Bangladesh J. Agric. Econs. XXXV, 1&2(2012) 131-142

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

Medium farms used higher amount of labour, manure, spent higher expenditure for ploughing and per hectare cost whereas the large farms used higher amount of seed and spent higher expenditure for irrigation. Large farms received higher production whereas small farms received higher gross return. Marginal farms received higher net return and benefit cost ratio. The identified vital factors responsible for the increase of production were fertilizer, manure, insecticide cost, land under production, experience and irrigation cost. Small farms attained the highest technical efficiency followed by medium, large and marginal farms respectively. The efficiency attainments at the highest level (90% - 100%) were highly satisfactory for small farms, moderately satisfactory for medium farms and most satisfactory for large farms. But this was not at all satisfactory for marginal farms. All farms used the same production technology. Production could not be increased by increasing efficiency with available technology except in marginal farms. Only marginal farms could increase total output by the efficient utilization of existing resources and available technology. Only more advanced technology was to be applied for increasing the volume of Aus, Aman and Boro rice in small, medium and large farms.

Knowledge Management: Journal