TECHNICAL EFFICIENCY AND ITS DETERMINANTS IN DAIRY FARMERS IN KURUNEGALA DISTRICT: STOCHASTIC FRONTIER PRODUCTION FUNCTION

Abstract

The objectives of this study are to estimate the technical efficiency and examine the impact of demographic and farming characteristics on technical efficiency among smallholder dairy farmers in Maho Divisional Secretariat in Kurunegala district during 2022. A structured questionnaire was used to collect information about milk production inputs and outputs, as well as other pertinent data, from 150 dairy farmers through convenience sampling. Maximum likelihood estimates of a stochastic production function were employed in the study and its results revealed that milk output was positively influenced by the number of milking cows and negatively influenced by the expenditure on veterinary at a 1% significant level. The average technical efficiency of the selected milk production farmers given by the Cobb – Douglas production function was 91% with minimum and maximum efficiency levels of about 73% and 96% respectively. This indicates that there is a scope and exists room for improving the existing level of milk production through enhancing the level of technical efficiency by 9% without increasing the level of input. In order to identify the impact of demographic and farming characteristics on technical efficiency, the Tobit model was applied. The results showed that age, sex, family size, and the number of milking times positively influenced the technical efficiency of milk production while access to credit marginally and positively influenced the efficiency of milk production in the study.