Risk Adjusted Production Efficiency of Maize Farmers in Ethiopia: Implication for Improved Maize Varieties Adoption

Abstract

This study analyzes the technical efficiency and production risk of 862 maize farmers in major maize producing regions of Ethiopia. It employs the stochastic frontier approach (SFA) to estimate the level of technical efficiencies of stallholder farmers. The stochastic frontier approach (SFA) uses flexible risk properties to account for production risk. Thus, maize production variability is assessed from two perspectives, the production risk and the technical efficiency. The study also attempts to determine the socio-economic and farm characteristics that influence technical efficiency of maize production in the study area. The findings of the study showed the existence of both production risk and technical inefficiency in maize production process. Input variables (amounts per hectare) such as fertilizer and labor positively influence maize output. The findings also show that farms in the study area exhibit decreasing returns to scale. Fertilizer and ox plough days reduce output risk while labor and improved seed increase output risk. The mean technical efficiency for maize farms is 48 percent. This study concludes that production risk and technical inefficiency prevents the maize farmers from realizing their frontier output. The best factors that improve the efficiency of the maize farmers in the study area include: frequency of extension contact, access to credit and use of intercropping. It was also realized that altitude and terracing in maize farms had influence on farmer efficiency.