Technical, allocative and economic efficiency of malt barley producers in Arsi zone, Ethiopia

Abstract

With the available resources and existing production technology, to minimize the gap between demand and supply of malt barley grain, improving productivity by enhancing production efficiency is the best option available as the vast majority of Ethiopian farmers are poor and lack the required capital to adopt new technologies and to reallocate the resources. This research estimated the technical, allocative, and economic efficiencies using the stochastic production frontier and identified their determinants by employing the two-limit Tobit regression for randomly selected malt barley farmers in Arsi zone, Ethiopia. The mean technical, allocative, and economic efficiency levels were found to be 87.1%, 80.6% and 70.6%, respectively. The Tobit model results show that education, credit access, livestock size, distance from market, proximity to homestead, and soil fertility status were significant factors affecting all efficiency estimates. Family size and landholding had a significant effect on allocative and economic efficiencies, whereas cooperative membership, extension contact, and off/non-farm income were the major determinants of technical efficiency. The results, in general, demonstrated that the production efficiency of malt barley farmers could be improved with the existing farm resources and level of technology. Based on the findings, the production efficiency malt barley producers in Arsi zone can be enhanced by expanding formal and informal education, creating ways of experience sharing amongst farmers, improving input distribution systems, and providing quality extension, financial, market and transportation services.