Determinants of technical efficiency in smallholder food crop farming: Application of stochastic frontier production function

Abstract

This study presents empirical study of factors influencing the technical efficiency of food crop farmers in Oyo state of Nigeria. Efficiency analysis is an issue of interest among economists in recent times, given that the overall productivity of an economic system is directly related to the efficiency of production of the components within the system. For this study, data were collected from 67 foodcrop farmers who were randomly selected among foodcrop farmers in the study area. The stochastic frontier production function methodology was used to empirically determine the level of technical efficiency of the farmers as well as the factors that influence the efficiency. Given the specifications of a translog stochastic frontier production function, in which the technical inefficiency effects are specified to be functions of several explanatory variables, the inefficiency effects of the smallholder farmers were significant. The estimated technical efficiencies of the sample farmers varied widely, ranging from 19 % to 95 %, with a mean value of 82 %, indicating that the farmers are 82% efficient in the use of their production inputs. Age of farmer, farming experience, level of education, size of farm holdings as well as the ratio of hired labor to total labor use, were factors that significantly influenced the level of technical efficiency. The results show that the technical inefficiency of farmers increases with age, farm size and the ratio of hired labor to total labor, while the level of technical inefficiency tends to decline with years of experience and level of education. The results indicate an increasing returns-to-scale parameter which is significantly different from unity.