ANALYSIS OF PRODUCTION RISK ADJUSTED TECHNICAL EFFICIENCY OF RED PEPPER : THE CASE OF SILTIE ZONE LANFURO DISTRICT SOUTH ETHIOPIA

MOHAMMED ESSA, MUKTAR ESSA

Abstract:

This study objective was to add the additional empirical findings on the works of literature, that explain the possible causes of red pepper yield fluctuations in the study area. The output gap that exists between observed and the potential output indicates an opportunity for further output growth. To estimate the production risk and technical inefficiency effects the study was employed a cross-sectional data that collected from 320 sampled red pepper farmers in the study area. The results of the study confirmed that the translog (transcendental logarithmic ) production model specification was the best-fitted model. To estimate the level of technical efficiencies, this study was employed the stochastic frontier model with flexible risk properties that able to considered production risk. Hence, the output fluctuation is evaluated from both production risk and technical inefficiency sources. The estimations results of the mean output, production risk and technical inefficiency models provided by using a one-step maximum likelihood in the sfcross command with STATA16 software. The study justifies the presence of technical inefficiency and production risk in the red pepper production process. The input variable fertilizer, seed, another cost of agrochemicals and labour positively affect the red pepper output. The study also shows that the red pepper production technologies exhibit increasing returns to scale in the study area. Fertilizer, seed, costs of agrochemicals reduce output risk whilst labour increase output risk but its effect was insignificant. This study finding demonstrates that the causes of technical efficiency differentials among sampled red pepper farmers in the study area. The average technical efficiency scores of red pepper farmers are 62.5 per cent in the study area. There is a significant difference between the estimations of the production risk-adjusted and not adjusted averages technical efficiencies. The market information, extension contact, and gender being head household positively related to technical efficiency. The age of household head, the prevalence of diseases, family size and education at college and above level negatively related to technical efficiency. This study recommends that inputs for red pepper production should be made readily available, affordable and accessible to farmers so that more may be employed to further increase output.

Keywords:
Red Pepper, Flexible Stochastic Frontier Model, Production Risk-adjusted Technical Efficiency, Cobb-Douglas Production Function

DOI: 10.20472/BM.2022.10.1.002

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APA citation:
MOHAMMED ESSA, MUKTAR ESSA (2022). Analysis Of Production Risk Adjusted Technical Efficiency of Red Pepper : The Case Of Siltie Zone Lanfuro District South Ethiopia. International Journal of Business and Management, Vol. X(1), pp. 30-58. , DOI: 10.20472/BM.2022.10.1.002


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