Technical Inefficiency of Smallholder Wheat Production System: Empirical Study from Northern Ethiopia

Abstract

This paper estimates the level and determinants of technical inefficiency of wheat producers based on data collected from 320 randomly selected wheat-producing farm households in four districts of Tigray regional state, Northern Ethiopia. Technical efficiency in wheat production was estimated using Cobb-Douglas stochastic production frontier model while a technical inefficiency model was estimated to identify sources of inefficiency. The mean technical efficiency of wheat producers was estimated to be only 57%. Given the present state of technology and input level, the result suggests that there is plenty of scope to increase wheat output (efficiency). The technical inefficiency model results suggest that there is an opportunity to reduce inefficiency in wheat production; and in this regard, farmer education, livestock size, and access to market information were found to have a counter effect on inefficiency. These factors represent human capital, production assets and improved information access for enhanced decision-making capabilities as important areas of intervention to reduce inefficiency. Overall, the results indicate the important role that sources of information and knowledge play in reducing technical inefficiency.