Technical Efficiency and Evidence of Economies of Scope in Botswana Agriculture: A Stochastic Input Distance Function Approach (1979-1996)

Abstract

This study estimate technical efficiency indices and examines evidence of economies of scope in Botswana agriculture for each 18 districts and commercial sector using a multiple-output multiple-input stochastic input distance function approach covering data from 1979 to 1996. The estimated model provides input-output relations, economies (diseconomies) of scope and technical inefficiency. All the production outputs (cattle, crops and goats/sheep) were significant with expected signs. The estimated mean technical efficiency of 0.885 for 18 districts and the commercial sector was obtained. This suggest the existence of inefficiency in Botswana agricultural production which indicates that there is opportunity to increase production with the same quantities of input factors, and through adaptation of improved technology such as irrigation, use of fertilisers, and improved high quality crops and livestock. There is significant in economies of scope between the production of cattle and goat/sheep, at the 1 percent level, and cattle and crops at 5 percent level. This existence of economies of scope indicates that higher economic returns are possible through efficient use of labour and livestock feeds, and reducing risk by not producing output (e.g., crops) that is easily affected by droughts and poor soils.