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

THANK YOU