Technical Efficiency of Paddy Farming and Its Determinants: A Stochastic Frontier Production Model

Abstract

This study analyzes the level of technical efficiency of paddy farming. It based on stratified randon sampling of 285 Malaysian paddy farmers under the management of the Muda Agricultural Developement Authority. Data was analyzed using Ordinary Least Squares and Stochastic Frontier Analysis method in the Cobb-Douglas production function. We estimated the paddy farming technical efficiency and its determinants. The results indicate that the Cobb-Douglas model with distribution of half-normal is better than the truncated normal as the average technical efficiency of the former is 0.855 and relatively higher than 0.624 in the latter. While the paddy income, the household income and the operational costs help to improve efficiency, the cultivation size, number of workers and land rent are associated with deterioration in efficiency. The input-output relationship further show that the cultivation size, number of workers, seeds and machinery used improve the output.. The study in consequence recommended policies that will ensure the cost of productive inputs such as machinery cost and land rent are affordable to farmers. Moreover, these policies may also improve households’ income through better pricing for their outputs and reduction in technical inefficiencies in paddy production.