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Technical Efficiency in Agricultural Production and Its Determinants : An Exploratory Study at the District Level

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  • K. R. Shanmugam

    (MSE)

  • Atheendar Venkataramani

Abstract

Given the importance of agriculture to the well being of a large percentage of Indias population, it becomes important to study how improvements can be made in the productivity of this sector. This study attempts to estimate the technical efficiency a measure of how well inputs are being used towards producing output of about 250 Indian districts in 1990-91. It employs the stochastic frontier function methodology. The results indicate that (i) the land elasticity is the highest followed by fertilizer; (ii) the mean efficiency of raising agricultural output is 79 per cent and therefore there is a scope for increasing output by 21 per cent without additional resources; (iii) states such as Madhya Pradesh, Uttar Pradesh, and Rajasthan have the largest number of districts with below average TE and they stand to gain the most from policy interventions towards improving technical efficiency. The results further indicate that health, education, and infrastructure are powerful drivers of efficiency at the district level and the relative importance of the determinants of efficiency across districts depends greatly on environmental factors, such as agro-climatic zones, technological factors, and crop mix. The results highlight the need for developing policy strategies at a more localized level.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22513.

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Date of creation: Jan 2006
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Handle: RePEc:eab:macroe:22513

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Related research

Keywords: agriculture; technical efficiency; stochastic frontier function; India;

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  1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  2. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, vol. 7(3-4), pages 185-208, October.
  3. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," CSAE Working Paper Series 1995-11, Centre for the Study of African Economies, University of Oxford.
  4. Martin, Philippe & Rogers, Carol Ann, 1995. "Stabilization Policy, Learning by Doing, and Economic Growth," CEPR Discussion Papers 1130, C.E.P.R. Discussion Papers.
  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. K. Kalirajan, 1981. "An Econometric Analysis of Yield Variability in Paddy Production," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 29(3), pages 283-294, November.
  7. 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.
  8. David E. Bloom & David Canning, 2004. "The Health and Wealth of Africa," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 5(2), pages 57-81, April.
  9. Bhargava, Alok & Jamison, Dean T. & Lau, Lawrence J. & Murray, Christopher J. L., 2001. "Modeling the effects of health on economic growth," Journal of Health Economics, Elsevier, vol. 20(3), pages 423-440, May.
  10. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "The Effect of Health on Economic Growth: Theory and Evidence," NBER Working Papers 8587, National Bureau of Economic Research, Inc.
  11. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
  12. Tadesse, Bedassa & Krishnamoorthy, S., 1997. "Technical efficiency in paddy farms of Tamil Nadu: An analysis based on farm size and ecological zone," Agricultural Economics, Blackwell, vol. 16(3), pages 185-192, August.
  13. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
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