Determinants of productivity variation and technical efficiency of tea small holders in the low country of Sri Lanka

Abstract

Tea is produced in Sri Lanka by the estate sector and smallholdings sector. Currently, tea smallholders contribute to 75% of the total tea production in the country. The highest extent of smallholder owned tea lands are accumulated in the low country (<300 m amsl), covering Ratnapura, Galle and Matara districts. Although the productivity of tea smallholdings sector appears comparatively higher than the estate sector, there is an extensive gap between the lowest and the highest productivity values. The objectives of this study were to identify the determinants of productivity variation and to determine the technical efficiencies of tea smallholders in the low country of Sri Lanka. A field survey was conducted for primary data collection from 300 tea smallholders representing 68 tea inspector regions. Data were analyzed by FRONTIER 4.1 and the stochastic frontier production function was estimated for both Cobb-Douglas and Trans log models. The Trans Log model fitted the best, in explaining the determinants compared to the Cobb-Douglas model. The direct effects of hired labour, family labour, fertilizer and chemical were statistically significant (P<0.05) in the stochastic frontier, and the coefficients for these factors were 0.07, 0.12, 0.0.95 and -0.01, respectively. The average technical efficiency was 68.81% (range: 15% to 93.43%). The possibility of increasing output, without increasing the existing level of input was 31.19%.