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TECHNICAL EFFICIENCY IN STOCHASTIC FRONTIER PRODUCTION MODEL: A CASE

Abstract

The predominance of paddy cultivation as a major economic activity in domestic food production sector in Sri Lanka hardly needs any emphasis. Being the staple food crop account for 25 percent of total cultivable land and more than two million farmer families are engaged in farming as their main occupation. Village tanks are the backbone of the village paddy farming and the livelihood of families in the dry zone. However, yet, most of the dry zone paddy farmers have failed to capture technical efficiency and to adopt new technologies interventions basically due to poor managerial ability of economic resources. This paper investigated the resource use characteristics, profitability and managerial and technical efficiencies of paddy farming in a sample of paddy farmers selected from four minor tanks in Trincomalee district. In this study, the technical efficiency of paddy farmers was estimated by using stochastic frontier production function, incorporating technical inefficiency effect model. The Cobb Douglas production function was found to be an adequate representation of the data.According to the results obtained from the stochastic frontier estimation, the average technical efficiency of selected farmers given by the Cobb Douglas model is 60.23 per cent. This indicates that there is scope of farther increasing the output by 39.77 percent without increasing the level of input. With imputed cost profit margin of paddy farming under village tanks was Rs.2.05 per kg and Break even yield was 3,288 kg per ha.

Key Words: Stochastic Frontier Production Function, Cobb Douglas Function, Technical Efficiency, Village Tanks, Paddy Farming

For Full Paper: fmscresearch@sjp.ac.lk