Impacts of GAP on Profit Efficiency of Tea Farmers in Vietnam: An Application of Stochastic Profit Function

Tea production conducted under the standards of Vietnamese Good Agricultural Practices (VietGAP) has been strongly encouraged by the Vietnam government. However, there is no study on profit efficiency of VietGAP tea producers, which are therefore barriers for farmers and policymakers in terms of extending the tea production practice in Vietnam. Thus, this study investigated the profit efficiency of tea production practices using a stochastic profit frontier function. We applied propensity score matching to control for self- selection in assessing the profit efficiency of VietGAP and conventional tea farming. Our results indicated that the average profit efficiency of tea farmers was around 74%, suggesting 26% of profit was lost due to inefficiency. Furthermore, significant different profit efficiency was observed between the two farmer groups. We further found that tea farmers with larger production scale, better irrigation system, accessing extension service are more likely to adopt VietGAP tea practices than others are. Thus, public policies should focus on improving profit efficiency and facilitating adoption of eco-friendly production practice, and also supporting innovations to improve farmers’ production conditions, including the access to extension service, irrigation system, enlarged farm size, and labor-saving machinery.