Non-Parametric Approach towards Smallholders Rubber Production Efficiency: A Two-Stage Data Envelopment Analysis (DEA)

In South Sumatra, Indonesia, the productivity of smallholders’ rubber is lower than the productivity of private and government estates. The productivity of Indonesian smallholders’ rubber can be enhanced through intensification or technology improvement. The main objective of this study is to estimate the technical efficiency level and technical inefficiency effect model of smallholder’s rubber in South Sumatra. A survey was conducted from November 2016 to March 2017 in 11 districts in the South Sumatra Province. 384 rubber farmers were selected using a combination of purposive, multi-stage and random sampling techniques. This study employed a non-parametric approach (Two-stage DEA) using cross-sectional data to understand the rubber production process. The findings showed that the mean technical efficiency of the sampled farms under the VRS DEA was estimated at 0.80. However, the mean technical efficiency was still less than 0.82, indicating that on average, the sampled farms were not technically efficient. Tobit regression results showed that all of the determinants have the expected signs (negative) in relation to technical inefficiency, thus implying that these factors increase technical efficiency as expected. However, only two of the determinants, farming experience and tapping system were statistically significant to the level of technical efficiency.