Heterogeneity, Transient and Persistent Production Efficiencies of Major Crops in Southern Ethiopia

Agricultural productivity is a cornerstone for the economy of Ethiopia to ensure rural transformation. However, the increment of productivity of crops has slow progress. Hence, this study undertook to separate farm heterogeneity, short-run and long-run inefficiencies of productivity in southern Ethiopia. The study used the models of decomposing technical efficiency through various techniques like 4-random error components of stochastic frontier panel data models to distinguish between time-invariant farm-heterogeneity, persistence, and short-run inefficiencies. Thus, models used for the analysis have shown different estimates of overall efficiency levels. Fixed-effect and Kumbhakar-Heshmati models did not separate unobserved persistent efficiency from farm-heterogeneity efficiency. The estimated efficiency by the Kumbhakar-Lien-Hardaker model (0.4449) is significantly higher than the mean of the fixed-effect model with much lower variations. Mean transient efficiencies gleaned from true-fixed-effect, consistent true-fixed-effect, and Kumbhakar-Lien-Hardaker models become nearly equal except, the Kumbhakar-Heshmati model indicated that farmers faced severe, persistent productivity inefficiency problems. Average technical change in 2011/12 was 20.67% and declined much more to 9.44% and 5.82% in 2013/14 and 2015/16, sequentially. According to the estimation of overall technical efficiency, it is possible to capture about 39% to 99% of the untapped production in the crop subsector of Southern Ethiopia. Therefore, there was a decline in the growth rate of fertilizer used and land size covered by considered crops in the area. Land covered was declined by 3.06% for the considered crops from 2013/14 to 2015/16 production period. In the mean summary of technical efficiency at the zonal level, the aggregate persistent efficiency is lower than the transient one for all the zones. It confirmed that inefficiency varies from zone to zone between zones and household to household within the zone during the survey years. Thus, the policymaker should pinpoint the causes of inefficiencies separated in the time factors to improve the productivity of considered crops in the study area. A policy point that treats the persistent, transient, and farm-specific inefficiency enhancing conditions has to be set separately in each zone of Southern Ethiopia. Moreover, the greater focus of the policy is to alleviate the persistent inefficiency increasing factors in the study area.