This paper investigates the effect of labor out-migration and receipt of remittances on the technical efficiency of tea production using a sample of 200 tea smallholders in Ratnapura and Kalawana divisional secretariat divisions of Sri Lanka. A stochastic production function is estimated to evaluate the effects of migration, remittances and prominent characteristics of migrants on the mean green tea output and levels of technical efficiency. Results reveal that remittances have positive and significant effect on tea production. The inefficiency model indicates that amount of remittances sent and the education level of migrants have significant effects on deceasing inefficiency. However, duration of migration and age of migrants are shown to increase the inefficiency. This could be due to the fact that they are permanent migrants. The average technical efficiency of green leaf production of migrant smallholders is 77%, which is 15% higher than that of non-migrant smallholders. Overall, the findings suggest that the efficiency of allocation of inputs in green leaf production can be improved by using remittances to make more timely purchases of inputs and hired labor.
Keywords: Out-migration, tea smallholders, stochastic production function, technical Efficiency
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