Economic efficiency of smallholder major crops production in the central highlands of Ethiopia

Abstract

Despite the policy interest of the Ethiopian government to expand teff (Eragrostis tef), wheat and chickpea production for exports, domestic consumption and food and nutritional security for the rural poor the production system is not adequately market-oriented and productivity is at its lowest level. Besides, there is dearth of information on how limited resources in crops production are being used so as to optimize outputs in the country. Thus, this study was conducted to assess resource use efficiency and subsequently to determine the underlying factors which affect inefficiencies in the production of teff, wheat and chickpea by smallholder producers in the central highlands of Ethiopia. Cross-sectional data from a baseline survey conducted by the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) and Ethiopian Institute of Agricultural Research (EIAR) were used. Multistage sampling procedure was used to select a random sample of 700 smallholder crop producers from three districts namely Minjar-Shenkora, Gimbichu and Lume-Ejere. Using Data Envelopment Analyses (DEA) approach, the study established that smallholder farmers in the study areas are technically, allocativelly and economically inefficient with mean technical, allocative and economic efficiency scores of 0.79, 0.43 and 0.31, respectively. A One-Way ANOVA and Kruskal Wallis tests established that there is a significant variation in resource use efficiency across districts. Furthermore, a two- limit Tobit regression model results revealed that while family size, farming experience, credit access, walking distance to the nearest main market, and total own land cultivated during the long rainy season affect technical inefficiency positively and significantly; age of household head was found to have a negative and significant influence on technical inefficiency. The results also showed that whereas economic inefficiency was positively and significantly affected by family size, farming experience and membership to associations; for household heads having a role in their community contributed negatively and significantly to economic inefficiency. Moreover the study results also showed that about 37 percent of the farmers in aggregate operate under decreasing returns to scale. Based on the findings of the study policy implications for improvements in resource use efficiency and productivity were drawn.