Technical Inefficiency Determinants in Agricultural Production: The Case of Potato Farmers in Ethiopia

Purpose: The study identified the factors that cause variation in the level of efficiency in potato production. The study used household-level cross-sectional data collected in 2019/20 from 196 sample farmers selected by multistage sampling technique. Design/Methodology/Approach: For the data collection, a personally administered structured questionnaire was used. Descriptive statistics, a stochastic frontier model (SFM), and a two-limit Tobit regression model were employed in the analyses. Tobit's model revealed that technical efficiency was positively and significantly affected by education, land tenure status, extension service, credit, and soil fertility. In contrast, variables such as sex of household head, age of household head, farm size, and land fragmentation affected it negatively. Findings: Therefore, the study suggested the need for policies to discourage land fragmentation and promote education, extension visits, access to credit, and soil fertility to improve technical efficiency. Practical Implications: The results of the study observed that the efficiency of potato farmers varied due to the presence of inefficiency effects in potato production which is a reason to search alternative production methods. For example, technical efficiency is positively and significantly affected by education, land tenure status, extension service, credit, and soil fertility, whereas variables such as sex of household head, age of household head, farm size, and land fragmentation affected it negatively. Originality/Value: It is the first time in authors’ knowledge using land fragmentation, education, extension visits, and access to credit, to improve technical efficiency in agricultural production.