Single vs. Multiple Input Adjustments and the Economic Efficiency of Farmers: An Application to Rural Bangladesh

The aim of this paper is to illustrate the usefulness of single-input indices of the technical and allocative efficiency of farm households in rural Bangladesh, particularly when these are viewed in conjunction with the corresponding multiple-input indices. We focus on the question of whether single-input adjustments as opposed to (perhaps) more difficult multiple-input adjustments will be most effective (in terms of cost saving) in reducing or eliminating inefficiency. The application we consider is the efficiency of farmers in HYV rice cultivation which has spear-headed the "Green Revolution" in Bangladesh since the late '60s. In much of the empirical literature on efficiency, attention has primarily focused on the measurement of aggregate (i.e., multiple input) technical, allocative or profit efficiency. In contrast, studies on the inefficiency of individual inputs have been few, even though from a practical point of view, the inefficiency associated with individual inputs can be of particular relevance. Specifically, by revealing the pattern of inefficiency across inputs, single-input indices could help in determining the appropriate course of action in reducing or eliminating the costs of inefficiency, particularly when multiple-input adjustments are not feasible and/or the costs of adjustment vary by input. The rest of the paper is organized as follows. In Section II, we discuss the various efficiency indices which are the focus in this paper. Section III presents the models, the estimation strategy, an analysis- of our findings, and their major implications. Section IV concludes