For Thesis Defence

COLLEGE OF LEADERSHIP AND GOVERNANCE
SCHOOL OF POLICY STUDIES

DEPARTMENT OF POLICY ANALYSIS
Name E-mail ID number Phone number

Tariku Tereda [email protected] ECSU1902347 0935323468
25/06/2021G.C
Addis Ababa, Ethiopia
Thesis Title
ANALYSIS OF TECHNICAL EFFICIENCY OF

MAJOR CROP PRODUCTION IN ETHIOPIA: A
STOCHASTIC FRONTIER APPROACH
Outlines
 Back ground
 Problem statement
 Research questions
 Objectives of the study
 Conceptual framework
 Research methodology
 Result and discussion
 Conclusion
 Recommendation
Back ground
• It is a fact that at the early stage of economic growth, the major
economic activities are related to agriculture, which has a strong
growth linkage with other sectors (Morris et.al, 2007).
• However, the agriculture sector is unable to ensure food security and
alleviate poverty due to the fact that since the 1980s the production of
Africa has been too little food and low value-added products, and
productivity has been generally stagnant (As the agricultural sector's GDP
declines, it will have a negative impact on both agricultural poverty
reduction and food security.
• According to the Prosperity party's ten-year road map plan, people living
below the poverty line in rural Ethiopia were 30.4% in 2011, but this rate
was reduced to 25.6% by 2016.Recently, Ethiopia's agricultural
productivity performance has not been able to reduce the poverty rate of
rural citizens, and it is unable to play the role of producing enough input
for the manufacturing industry. AGRA, 2018)
Statement of the Problem
• For the past one and a half decades, Ethiopia's food cereal crop supply
and annual product consumption have demonstrated a consistent trend.
Despite the fact that the quantity of food crops produced has increased
significantly, Ethiopia's population continues to expand rapidly.
Furthermore, the availability of food cereal crops is expected to remain
stable, with the vast majority of Ethiopians consuming equal amounts of
food cereal crops each year (CSA, 2013).
• Ethiopia is Africa's second-most populous country (109.2 million
people), with a gross domestic product (GDP) of 84.4 billion dollars, 7.6%
GDP growth, 9.6% inflation, and a 2.5 percent population increase in
2018. In many developing countries, agriculture is a major source of income .
• Ethiopia is no exception, as its economy is primarily based on agriculture.
Agriculture accounts for over 50% of GDP, 85% of employment, 70% of
industrial raw materials, and 90% of foreign earnings. Crop and livestock
production are the primary sources of income and employment for 70% of
the country's rural population (World Bank, 2018a, b).
cont.
• Most previous research (Alemu & Haji, 2016; Musa et al. 2015; Belete,
2020; Gebrie & Mada 2018) has overlooked that technical efficiency of
major cereal crop productivity (land, capital, or labor) is the most
important factor in cereal crop production at the national level. Some of
them are concerned with administrative levels at the regional, district, or
zonal levels. Apart from that, they are all focused on total factor
productivity, which is insufficient to assess household cereal crop
productivity because it ties an output index to a composite index of all
inputs.
• TFP, on the other hand, faces numerous challenges in both theoretical
interpretation and empirical measurement; others focus on income
diversification. Therefore, this study filled this gap and considers
partial factor productivity measurement to be identified through which
cereal crop productivity indicators and also rural household cereal crop
productivity are adversely changed in Ethiopia.
Research Questions
 What are the factors that determine technical

efficiency of major cereal crop production in
Ethiopia?
 What is the sources of inefficiency in major
cereal crop production in Ethiopia?
 What is the mean technical efficiency of farm
producers on the three major cereal crops in
Ethiopia?
Objectives of the Study
 General objective
 The main objective of the study was to examine the

determinants of technical efficiency of major cereal crops in
Ethiopia.
 Specific Objectives
 To analyze the factors that determine technical efficiency
major cereal crop production in Ethiopia
 To examine the sources inefficiency in major cereal crop
production in Ethiopia
 To calculate the mean technical efficiency of farm producers
on the three major cereal crops in Ethiopia.
Conceptual framework
Research Methodology
Research r Research design quantitative

Research approach deductive

Population and Sample size Entire rural parts of Ethiopia
except non- sedentary
Sampling techniques stratified two-stage cluster

sample design
Data source Secondary data (CSA)
Method of data analysis Descriptive and econometric
model
Analytical Tool and Model Specification
The empirical model was specified as follows.
• lnoutputi = β0+β1lnimprovedseedi + β2lnfertlizer +
β3lnlandsize+ vi − ui
The inefficiency models were specified as follows.
• ui = δ 0 +δ 1 Irrigation + δ2 Pesticide+ δ3extension + δ4sex
The three identical models generated from this leading model for this study were
• lnoutput maize = β0+ β1lnimprovedseedi + β2lnfertlizer + β3lnlandsize+ vi− (δ0+
δ1irrigation + δ2pestiside + δ3extension+ δ4sex) +∈I

Table 1: output and input variable for the stochastic frontier
model
output and Symbol coefficient variable variable Measurm-
input variable kind type ent
Wheat/ maize/ ln_prod98cq Dependent Continuous quintal
sorghum output maize/wheat/sorgh
um
Amount of Lnfertilizer β1 Independent Continuous Quintal
fertilizer
Amount of Lnimprovedseed β2 Independent Continuous Kilogram
improved seed
Land area for Lnareah β3 Independent Continuous Hectare
wheat/ maize/
sorghum
Household sex Hhsex δ1 Independent Categorical 1for male
0 for female
Irrigation use irrg δ2 Independent Categorical 1for users
0 otherwise
Extension use Ext δ3 Independent Categorical 1for users
0 otherwise
Result and Discussion
Table 5: Regression output of the stochastic frontier model by crop type
Efficiency Model
Crop Type X- maize: wheat: Sorghum:
Variables N=7,107 N=6,734 N=3,080
(Inputs) Coefficient Coefficient Coefficient
Lnfertlizer 0.076924*** 0.031672*** -0.46534**
Lnimprovedseed -0.01697** 0.047186*** 1.128469***
Lnareah 0.98957*** 0.991557*** 2.392435***
Inefficiency Model
Sex 0.280807*** -0.28274*** -0.57061**
Irrigation -0.67921*** -0.08451 -2.1589***
Extension 0.530505*** 0.123459*** 0.751875***
Cont.
Crop Type X- maize: wheat: Sorghum:

Variables (Inputs) N=7,107 N=6,734 N=3,080
Coefficient Coefficient Coefficient
_cons 3.744037*** 3.087448*** 10.78217***

sigma2 0.47442*** 0.235165*** 0.421865***
Lambda 2.423236 1.225424 0.002486
Gamma 0.85 0.60 0.58
Lr test 24 77.43 47
Cont.
•Table 6: Computed technical efficiency results of maize, wheat and

sorghum
Technical Maize Wheat Sorghum

Efficiency
Mean TE (%) 52.4% 56% 55%
TE > 75(%) 32% 62% 46%
Major (key) finding
• This study's key finding is that there is significant room to
reduce the level of technical inefficiency in Ethiopia's major
crop production of maize, wheat, and sorghum.
• all input variables except improved seed for maize
production were found to be binding in the production of
major crop
• Fertilizer application in sorghum also needs another
experiment,
• The inefficiency effect analysis shows irrigation is the major
determinants
• extension usage was found to have a drawback
Conclusions and Recommendations
Conclusion
 This study differs from the preceding ones for the fact that the
sample size is more representative in view of the
geographical scope and the size of respondents used in the
study
 The Stochastic frontier production function was used to
analyze the technical efficiency of major crop production in
Ethiopia. variations in output due to technical inefficiency
for maize, wheat and sorghum production were calculated to
be 85, 60 and 58 percent respectively.
Conclusion contd.
• Besides the result of the frontier production function indicates that all
input variables except improved seed for maize production were
found to be binding in the production of major crops, meaning that an
increase in one of the inputs will enhance production, keeping
everything constant
• Fertilizer application in sorghum also needs another experiment, because
the findings directs a negative elasticity
• . Moreover, the mean technical inefficiency was 47.6%, 44% and 45%
for maize, wheat and sorghum, respectively. These are the result of
47.6%, 44%, and 45% inefficient resource use, respectively, resulting in
a significant major cereal crop yield gap. However, even though they are
relatively efficient, there is still room to enhance production by nearly
47.6%, 44% and 45% for maize, wheat and sorghum respectively,
Conclusion contd.
• The inefficiency effect analysis for major crop production

shows that irrigation is the major determinants
• As far as the technical inefficiency of maize production is
concerned, extension usage was found to have a positive and
significant effect.
Recommendations
 Farmers must also allocate more of their available farm land to

major cereal production or use it for relay cropping, as well as
increase irrigation application, in order to increase major
cereal productivity to a potential level.
 With respect to technical efficiency, the government of
Ethiopia needs to introduce policies and alert farmers to use
extension packages and irrigation potential as a new tactic,
since this would help reduce technical inefficiency
 The Ethiopian government is also required to provide a
transformed extension service and training for farmers on
proper input application as well as improved seed varieties
with disease resistance and high productivity traits.

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COLLEGE OF LEADERSHIP AND GOVERNANCE

SCHOOL OF POLICY STUDIES

Name E-mail ID number Phone number

ANALYSIS OF TECHNICAL EFFICIENCY OF

 What are the factors that determine technical

 The main objective of the study was to examine the

Research r Research design quantitative

Sampling techniques stratified two-stage cluster

The empirical model was specified as follows.

• lnoutputi = β0+β1lnimprovedseedi + β2lnfertlizer +

The inefficiency models were specified as follows.

• ui = δ 0 +δ 1 Irrigation + δ2 Pesticide+ δ3extension + δ4sex

• lnoutput maize = β0+ β1lnimprovedseedi + β2lnfertlizer + β3lnlandsize+ vi− (δ0+

δ1irrigation + δ2pestiside + δ3extension+ δ4sex) +∈I

Crop Type X- maize: wheat: Sorghum:

_cons 3.744037* 3.087448* 10.78217***

•Table 6: Computed technical efficiency results of maize, wheat and

Technical Maize Wheat Sorghum

• The inefficiency effect analysis for major crop production

 Farmers must also allocate more of their available farm land to

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