Analysis of Farm Households' Technical Efficiency in Production of Smallholder Farmers: The Case of Girawa District, Ethiopia

Though agriculture remains to be the most important sector of the Ethiopian economy, its performance has been disappointing and food production has been lagging behind population growth. This gap between demand for and supply of food can be reduced by improving productivity either through introduction of modern technologies or improving the efficiency of inputs. However, as the potential to increase production by bringing more resources into use became more and more limited, the efficiency with which the farmers use available resources has received the utmost attention. Therefore, this study was aimed at analyzing the technical efficiency of farm production of smallholder farmers in Girawa district using cross sectional data collected from randomly selected 200 sample households during year 2011/12 production season. Cobb-Douglas production function was fitted using stochastic production frontier approach to estimate technical, efficiency levels and to identify factors affecting efficiency levels of the sample farmers. The estimated results showed that the mean technical efficiency was 81.5% and it indicated that there was a significant inefficiency in farm production in the study area. The discrepancy ratio ( ), which measures the relative deviation of output from the frontier level due to inefficiency, implied that about 75% of the variation in maize production was attributed to technical inefficiency effects. Among factors hypothesized to determine the level of technical efficiencies, education, livestock holding, extension contact, farmers training, cultivated area and participation to irrigation were found to determine technical efficiencies of farmers positively while social status had negative relationship with technical efficiency. Hence, emphasis should be given to improve the efficiency level of those less efficient farmers by adopting the practices of relatively efficient farmers in the area. Beside this, policies and strategies of the government should be directed towards the above mentioned determinants.