Land tenure and cost inefficiency: the case of rice (Oryza sativa L.) cultivation in Chile

Abstract

This study aims to examine the impact of land tenure arrangements on production costs in a sample of rice farmers in Ñuble Region, Chile. A stochastic frontier model was estimated using the primal approach on a panel of 107 farmers in 2014-2015. Production cost was broken down into frontier costs and inefficiency. According to findings, economic inefficiency raises rice production costs by 82%. Technical inefficiency accounts for a 61% increase, while allocative inefficiency accounts for 21%. Across tenure types, land is the input with the highest misallocation, accounting for 93% of allocative inefficiency costs. Sharecropping is the arrangement allocating inputs most efficiently, producing significant differences in production costs relative to leasing and ownership. This finding suggests that before designing a policy to induce a tenure system, it is necessary to evaluate specific cases as there is no system superior to another, strictly speaking.