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Estimating Technical Efficiency, Input substitution and complementary effects using Output Distance Function: A study of Cassava production in Nigeria

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  • Ogundari, Kolawole
  • Brummer, Bernhard

Abstract

In this study, we estimate an output distance function in the context of a multi-output and multi-input production technology by stochastic frontier techniques. Unbalanced panel data for smallholder farms that grown cassava and other crops in Southwestern Nigeria covering 2006/07 to 2008/09 farming seasons is used for the analysis. The results show that the marginal rate of transformation (MRT) between “other crops” grown by the farmers and cassava produced relative to the output mix is negative and significantly different from zero. We observed also that increasing returns-to-scale as well as technical progress characterized cassava production in the region. Furthermore, fertilizer and pesticides are found to have significant substitution effects on cassava production in the sample. We also found evidence that, in pairs, farm size and pesticides, labour and fertilizer as well as fertilizer and pesticides jointly exhibit significant complementary effects on cassava production in the region. An average technical efficiency level of 72.1 percent which implies approximately a 39 percent inefficiency level is observed from the study. Over the seasons, we found significant evidence of an increasing trend in technical efficiency level of the farms. Extension, credit and, occupation (i.e., full time farming) are indentified as efficiency increasing policy variables from the study.

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Bibliographic Info

Paper provided by African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA) in its series 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa with number 95773.

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Date of creation: 2010
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Handle: RePEc:ags:aaae10:95773

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Keywords: Cassava; technical efficiency; inputs substitution; complementary effects; Crop Production/Industries;

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  1. Thiam, Abdourahmane & Bravo-Ureta, Boris E. & Rivas, Teodoro E., 2001. "Technical efficiency in developing country agriculture: a meta-analysis," Agricultural Economics, Blackwell, vol. 25(2-3), pages 235-243, September.
  2. K. Hadri & C. Guermat & J. Whittaker, 2003. "Estimation of technical inefficiency effects using panel data and doubly heteroscedastic stochastic production frontiers," Empirical Economics, Springer, vol. 28(1), pages 203-222, January.
  3. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-80, May.
  4. Bernhard Br�mmer & Thomas Glauben & Geert Thijssen, 2002. "Decomposition of Productivity Growth Using Distance Functions: The Case of Dairy Farms in Three European Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 628-644.
  5. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  6. O'Donnell, Christopher J. & Coelli, Timothy J., 2005. "A Bayesian approach to imposing curvature on distance functions," Journal of Econometrics, Elsevier, vol. 126(2), pages 493-523, June.
  7. Silvio Daidone & Francesco D'Amico, 2009. "Technical Efficiency, Specialization and Ownership Form: Evidences from a Pooling of Italian Hospitals," CEIS Research Paper 143, Tor Vergata University, CEIS, revised 30 Sep 2009.
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  9. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May.
  10. Paul, Catherine J. Morrison & Nehring, Richard, 2005. "Product diversification, production systems, and economic performance in U.S. agricultural production," Journal of Econometrics, Elsevier, vol. 126(2), pages 525-548, June.
  11. Subal Kumbhakar & Luis Orea & Ana Rodríguez-Álvarez & Efthymios Tsionas, 2007. "Do we estimate an input or an output distance function? An application of the mixture approach to European railways," Journal of Productivity Analysis, Springer, vol. 27(2), pages 87-100, April.
  12. Maria L. Loureiro, 2009. "Farmers' health and agricultural productivity," Agricultural Economics, International Association of Agricultural Economists, vol. 40(4), pages 381-388, 07.
  13. Brummer, B. & Glauben, T. & Lu, W., 2006. "Policy reform and productivity change in Chinese agriculture: A distance function approach," Journal of Development Economics, Elsevier, vol. 81(1), pages 61-79, October.
  14. Grosskopf, S. & Margaritis, D. & Valdmanis, V., 1995. "Estimating output substitutability of hospital services: A distance function approach," European Journal of Operational Research, Elsevier, vol. 80(3), pages 575-587, February.
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