Technical efficiency of cotton farms and its determinants: Application of stochastic frontier analysis

Abstract

Efficient use of scarce resources is an important issue for countries and sectors. This study uses farm level data to investigate the technical efficiency and its determinants for a sample of 80 cotton farms using the translog stochastic frontier analysis. The mean technical efficiency of the farms was found to be 86.8% indicating that about 13.2% of output level is lost to technical inefficiency. This implies that a potential exists to increase cotton production through improved efficiency in the research area. Technical inefficiency was modelled as a function of farm specific variables. The main determinants of technical efficiency include farmer's age, farm size, farmer's experience and non-farm income. The variables of farm size and farmer's experince negatively affected technical inefficiency. As farm size and farmers' experience increased technical inefficency decreased. However, farmer's age and non-farm income showed positive relationship with inefficiency. In the light of these findings, new agricultural policies should be designed to increase technical efficiency of cotton farms. Agricultural policies that will be implemented to improve the technical efficiency of cotton farms will also create an opportunity to increase the profitability and sustainability of the farms.