A Comparative Analysis of Technical Efficiency of
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Transcript A Comparative Analysis of Technical Efficiency of
A Comparative Analysis of
Technical Efficiency of Tobacco
and Maize Farmers in TaboraTanzania
A.Kidane; A.Hepelwa; E.Ngeh & T. W. Hu
This study was supported by a grant from United States National
Institute of Health – Fogarty International Center and National
Cancer Institute R0/TW009295
OUTLINE
Background
Objective of the study
Methodology
Results
Concluding remarks
Background
The agriculture sector in plays an important
role for the overall economy in Tanzania
◦ It contribute significantly to food security, rural
employment, and provision of industrial raw
materials for other sectors in the country.
◦ It contributes 27% of GDP, 51% of foreign
exchange, 75% of total employment (WB, 2013)
Agricultural sector is identified as key driver
of the growth and poverty reduction in the
country
Cash crops and export earnings
Tobacco production
Background –cont
Based on gains at macro level analysis, extension
agents and companies are encouraging farmers to
produce more tobacco by availing credit to purchase
fertilizer and seeds.
Setting the negative health consequence aside, if one
is to undertake benefit cost analysis, tobacco farming
may not be the better option for small scale farmers.
There are economic costs associated to the
production and consumption of tobacco. The costs
include health risks and environmental problems.
Background –cont
Tobacco cultivation is labor intensive
◦ 10 hours per day
◦ 10 months period from cultivation to harvest.
The gestation period for annual crops such
as maize or ground nuts is less than 4
months with relatively less labor input.
The quest in this paper to use evidenced
based research findings on how production
of other crops than tobacco is beneficial in
Tanzania
Objective of the study
This study aims at comparing production
efficiency between tobacco and maize
We investigate whether tobacco farmers
are better off growing tobacco as
compared to maize (the main staple food).
The study is set to empirically determine
and compare the efficiency of tobacco and
maize farmers.
Methodology
This study employs the stochastic frontier
production function as proposed by Battese
and Coelli (1995).
The study estimate frontier production
functions for maize and tobacco and identify
which is more efficient
The study analyze the determinants of
technical efficiency (TE) for the two crops.
Definition
Technical efficiency (TE) is a ratio of the farmer
actual production to the optimal output.
TE reflects the ability of the producer to obtain
maximum outputs from a given set of inputs.
The producer is said to be technically efficient when
the actual output is equal to the optimal output
For the given production processes, TE
would be measured theoretically within
the range (0, 1] i.e
If farmers achieve their maximum output,
then they would be technically efficient
Otherwise there is inefficiency i.e TE<1
Estimation:
Stage I: Production function
Y 0 1 X 1 2 X 2 3 X 3 4 X 4 i i
Y= total output
X1= labour inputs
X2= land cultivated
X3= proportion of fixed assets used
X4 = Cost of fertilizer, pesticides and fungicides
vi = error term (factors outside the control of the
farmers)
μi = error term that reflects the technical inefficiency
If no inefficiency; μi = 0
Stage II: Inefficiency model
Factors influencing inefficiency
z1= gender of the farmer (Binary)
z2 = Age of the farmer
z3 = Educ. level (1= has formal education)
z4 = Household size
z5 = Farm size in acres
z6 = land ownership(binary)
Estimation - ML
The Cobb-Douglas production frontier
and the inefficiency model defined are
estimated using the Maximum Likelihood
(ML) method.
STATA is used to estimate the TE
Study area and data
The study uses farmers’ data collected in Tabora
region
Major tobacco producing region in Tanzania.
At first, purposive sampling of 6 villages was done
to ensure presence of both tobacco and maize
farmers in our sample
Then, the study randomly selected 306 farmers,
the strategy was to select 50 farmers per village.
Study area and climate
Climate and Population
The annual rainfall is between 700 mm and
1000 mm,
with the daily mean temperature around
230C .
The region has a population of about 2.2
million (National Census, 2012).
Population density is 30 persons/km2
Technical efficiency results
TE levels and percent of farmers
40
35
30
25
20
15
10
5
0
<0.1
0.21- 0.30
0.31-0.40
0.41-0.50
0.51-0.60
TE Maize
0.61-0.70
TE Tobacco
0.71-0.80
0.81-0.90
>0.91
Conclusion
Farmers in the study area appear to be
relatively more efficient in the production of
maize than tobacco.
When the earnings from tobacco are
compared to the other crops such as maize
the former appears to generate more earning.
This scenario appears to be reversed when
the corresponding input costs are taken into
consideration.
When net earnings is estimated on per
acre or per manpower it appears that
farmers in the study area are better off
being engaged in non tobacco crops.
This finding does not take into
consideration various health hazards
associated with tobacco production.
There is a need for more research on various
issues to guide policy makers for effective
tobacco control in the region.
Limitation
Health hazards from tobacco farming has
not been taken into account
We have not compared the welfare of
farmers
NEW EFFORTS
Similar study is underway using National
Agriculture Census Survey
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