Factors Affecting the Economic Efficiency of Small-Scale Rubber Plantations: With Special Reference to Kalutara District in Sri Lanka

Abstract

The Rubber Industry has been a major partner in the Sri Lankan economy. According to the literature, farmers in developing countries have failed to achieve full potential of Technical Efficiency (TE) and Allocative Efficiency (AE). This paper investigates the Economic Efficiency (EE) of Small Rubber Plantation Owners (SRPOs) in Sri Lanka by employing stochastic production frontier using a sample of 120 SRPOs. The results showed that the average TE of selected SRPOs is 82.86%. This indicates that output can be further increased by 17.14% without increasing the level of input. Gender and the number of family members were identified as the variables that have the greatest impact on the TE. The AE analysis identified some inefficient situations such as overused land and labour. Also, it was revealed that SRPOs have not reached the maximum efficiency level while 32 of them have reached an efficiency level above 90%.