Crop Productivity as Influenced by Commercial Orientation of Smallholder Farmers in the Highlands of Eastern Ethiopia

Abstract

Smallholder farmers in Ethiopia are characterized by low crop production and productivity. As a result, production is primarily for self-consumption with a possibility of supplying only a small part of total output to the local markets. Despite their undisputed importance, most studies in Ethiopia focused on smallholder farmers’ commercial orientation and analyzed the determinants of the proportion of output sold in crop markets and failed to analyze the relationship between crop productivity and commercial orientation. Therefore, this research was conducted to elucidate synergies existing between commercial orientation and total factor productivity (TFP) among smallholder farm households in the highlands of Eastern Ethiopia. The study was conducted in four districts: two districts, namely, Gurawa and Haramaya were selected from eastern highlands of the region, and two districts, namely, Tullo and Habro were selected from eastern Hararghe highlands). A total of 385 sample household heads were selected randomly and interviewed using a semi-structured questionnaire to elicit data pertaining to crop production input and output market during the year 2015. A two-stage least squares (2SLS) regression model was applied for the analysis. Results of the 2SLS regression indicated that total factor productivity was strongly and positively influenced by the endogenous commercial orientation index. In addition, the number of oxen owned, market distance, extension visits, amount of manure used, quantity of labor used, and location dummy influenced TFP.

Keywords: Commercial orientation; Total factor productivity; Two-stage least square