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Measuring and explaining technical efficiency of dairy farms: a case study of smallholder farms in East Africa

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This article measures and explains the technical efficiency (TE) of 371 dairy farms located in 17 districts in East African countries. Three output and 10 input types were used to calculate the efficiency score for each farm. A two-stage analysis was conducted to measure and explain the efficiency scores. Firstly, the efficiency scores were measured by a data envelopment analysis (DEA) approach, which was implemented using a linear programming (LP) method. About 18 per cent of the farms were fully productive, each with an efficiency score of unity, which means this group is currently operating on the production possibility frontier. About 32 per cent of the farms had efficiency scores below 0.25, which means that about a third of the dairy farms would need to expand their dairy production by at least 75 per cent from the current level without any increase in the level of inputs. Secondly, a fractional regression method was used to explain the efficiency scores by relating them to a range of explanatory variables. The findings indicate that technology adoption factors, such as the existence of improved breeds, and feed and fodder innovations (e.g., growing legumes), have positive and statistically significant effects on the level of efficiency. Similarly, zero-grazing seems to have positive and highly significant effects. As far as marketing variables are concerned, selling milk to individual consumers or organisations seems to contribute positively and more significantly to dairy efficiency than other marketing outlets such as traders or chilling plants. Membership of a dairy cooperative has a positive effect but is not statistically significant.

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  • A. Gelan & B.W. Muriithi, 2012. "Measuring and explaining technical efficiency of dairy farms: a case study of smallholder farms in East Africa," Agrekon, Taylor & Francis Journals, vol. 51(2), pages 53-74.
  • Handle: RePEc:taf:ragrxx:v:51:y:2012:i:2:p:53-74
    DOI: 10.1080/03031853.2012.695140
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    1. Esmeralda Ramalho & Joaquim Ramalho & Pedro Henriques, 2010. "Fractional regression models for second stage DEA efficiency analyses," Journal of Productivity Analysis, Springer, vol. 34(3), pages 239-255, December.
    2. O'Donnell, Christopher J. & Coelli, Timothy J., 2005. "A Bayesian approach to imposing curvature on distance functions," Journal of Econometrics, Elsevier, vol. 126(2), pages 493-523, June.
    3. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    4. Guy Nkamleu, 2004. "Productivity Growth, Technical Progress and Efficiency Change in African Agriculture," African Development Review, African Development Bank, vol. 16(1), pages 203-222.
    5. Tim Coelli & Gholamreza Hajargasht & C.A. Knox Lovell, 2008. "Econometric Estimation of an Input Distance Function in a System of Equations," CEPA Working Papers Series WP012008, School of Economics, University of Queensland, Australia.
    6. Resti, Andrea, 1997. "Evaluating the cost-efficiency of the Italian Banking System: What can be learned from the joint application of parametric and non-parametric techniques," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 221-250, February.
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    Cited by:

    1. Msangi, Haji Athumani, 2017. "Examining The Inverse Relationship Between Farm Size And Efficiency In Tanzanian Agriculture," Research Theses 276448, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Gelan, Ayele & Muriithi, Beatrice W., 2015. "Examining Returns to Scale in Smallholder Dairy Farms in East Africa," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 54(3), pages 1-23, September.
    3. Rahman, Sanzidur & Awerije, Brodrick O., 2014. "Marketing efficiency of cassava products in Delta State, Nigeria: A stochastic profit frontier approach," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(1), October.
    4. Bardhan, D. & Sharma, M.L., 2012. "Determinants and Implications of Smallholder Participation in Dairy Co-operatives: Evidence from Uttarakhand State of India," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(4), pages 1-20.
    5. Awerije, Brodrick O. & Rahman, Sanzidur, 2014. "Profitability and efficiency of cassava production at the farm-level in Delta Stae, Nigeria," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 3(4), pages 1-9.

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