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Stochastic Frontier Model with Distributional Assumptions for Rice Production Technical Efficiency

A. Baten
Department of Decision Science, School of Quantitative Sciences, University of Utara Malaysia, 01610, UUM Sintok, Kedah, Malaysia.

I. Hossain
Department of Statistics, School of Physical Sciences, Shahjalal University of Science and Technology, Sylhet-3114, Bangladesh

Abstract/ Executive Summary:

Efficiency in agricultural production is indicative of the efficiency level of farm households in their farming activities. Farmers in developing countries do not make use of all the potential technological resources, thus making inefficient decisions in their agricultural activities. Herein, technical efficiency in relation with the production of three types of rice crop (Boro, Aus and Aman) was evaluated, with some determinants of technical efficiency identified, in Bangladesh. It was attempted, throughout this study, to access the status of technical efficiency in rice production in Bangladesh for panel data while using the Stochastic Frontier Production Model with either of truncated normal or half-normal distributional assumptions. Both time-variant and time-invariant inefficiency effects models were estimated, one at a time. Collected data from the agricultural sector pertaining to three main rice crops in Bangladesh for the period of 1980 to 2008 were made used of throughout the study. The results revealed that technical efficiency gradually increased over the reference period with the half-normal distribution being found preferable to the truncated normal distribution as regards the technical inefficiency effects. The value of technical efficiency was found high for Boro rice while low for Aus in comparison with Aman rice in Bangladesh for both distributions in either of time-variant or invariant ones. It was observed that the most efficient rice production system has occurred for the case of Boro with a technical efficiency of 0.98. Yearwise means technical efficiency increased during the reference time periods.

Keywords: Bangladesh rice production, Cobb-Douglas stochastic frontier model, Panel data, Time variants, Time invariant efficiencies

Location: In Bangladesh

Start Date: 00-00-1980

End Date: 00-00-2009

Program Area: Crop-Soil-Water Management

Commodity: Rice, Modeling

Objectives:

The objective is to assess the technical efficiency of rice production over time, and to observe the time-varying inefficiency effects as regards area, seed and fertilizer concerning rice production systems.

Methodology:

Data Set: The data on rice production in Bangladesh is obtained from the yearbook of agricultural statistics of Bangladesh, prepared by the Bangladesh Bureau of Statistics (BBS) every year. The dependent variable namely, rice production and such independent variables as area, seed, the level of fertilizer, rainfall, wage rate per labor without food and wage rate of a bullock pair for each crop are collected from yearly book of agriculture statistics of Bangladesh. For the present study, 29 time periods from 1980-1981 to 2008-2009 are taken into consideration. Such meteorological data as rainfall, temperature, and humidity are collected from the meteorological department in Bangladesh. The yearly distributions of fertilizer data for each rice crop (Boro, Aus and Aman) are collected from Bangladesh Agriculture Development Corporation. Production (Y): Total Boro (Local, HYV and Hybrid Boro), Aus (Local and HYV Aus) and Aman (broadcast, local transplant and HYV Aman) have been estimated at thousand metric tons. Area: The total areas under Boro, Aus and Aman rice have been estimated in hectares. Here we have considered the total area of cultivated land where specifically Boro is the cultivated crop. In this study all the varieties of each crop were taken into consideration. Seed: Seed is the very important input item in increasing a crop’s production. Therefore it is recommended that the farmers use pure, healthy seeds as per the minimum certification standards of standard percentages. In fact seeds from the foundation of farming highly good quality seeds are of the have genetic purity, physical purity, health standards and the required moisture percentage in accordance with the minimum seed certification standards. Fertilizer in Urea: Fertilizer (in urea) is a kingpin in enhancing crop production. The total amount of fertilizer (in urea) used in each crop is considered separately with the unit in metric tons.

Source of Information: J. Agr. Sci. Tech. (2014) Vol. 16: 481-496

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

The patterns of technical efficiency of rice production in Bangladesh is herein investigated making use of the Cobb-Douglas stochastic frontier production function. The model is estimated with the specification of the technical inefficiency effects models. Results indicate that rice production in Bangladesh is seen to be increased in time-varying and in time-invariant. The results indicated that the input variables included in the technical inefficiency effects have had a significant influence on rice production, especially seed and fertilizer (in TSP) within the rice production system. From the results, it is also understood that rainfall is observed as insignificant in rice production of Bangladesh. The time-varying inefficiencies parameter, η, is found positive for the truncated normal and as well for half-normal distributions. It is indicated that technical inefficiency increased over the reference period. Through the several tests, it is observed that the technical inefficiency effects are significant implying that technical inefficiency effects associated with the rice crops are significant. The half-normal distribution is found to be preferable to the truncated normal distribution for the technical inefficiency effect and the technical efficiency rate is found as gradually increasing over time as regards rice production. Moreover, technical inefficiency effects are also positively influenced by seed within the production process. Policies that lead to provision of improved seed to the farmer could be beneficial in enhancing efficiency in rice production in Bangladesh. In this regard, suggestions are pertinent for government and policymakers that efficient utilization, as well as a combination of fertilizer and improved seed, can reduce the inefficiency effects in rice production.

Knowledge Management: Journal