TECHNICAL EFFICIENCY OF POTATO PRODUCTION BY SMALLHOLDER FARMERS: THE CASE OF DINSHO DISTRICT, BALE ZONE OF OROMIA REGION, ETHIOPIA

This study was aimed to analyze technical efficiency of potato production by smallholder farmers in Dinsho district, Bale zone of Oromia region. The study used a cross sectional data obtained from a field survey using structured questionnaire from a random sample of 149 smallholder potato producers in the study area. The hypothesis test result showed that Cobb-Douglas production function was found to satisfactorily fit the data. A Cobb-Douglas stochastic frontier production analysis approach with the inefficiency effect model was used to simultaneously estimate technical efficiency and identify the determinants of efficiency variations among potato producer farmers. The maximum likelihood parameter estimates showed that potato output was positively and significantly influenced by area, quantity of urea fertilizer and quantity of seed used. The positive coefficients of these parameters indicate that increased use of these inputs will increase the production level of potato in the study area. The discrepancy ratio, γ, which measures the relative deviation of output from the frontier level due to inefficiency was 0.76. This implies that about 76 percent of the variation in potato output among the sample respondents was due to technical inefficiency effects. The result of the study further showed significance differences in technical efficiency among potato producers in the district. The single stage estimation result showed that the mean technical efficiency of the farmers was found to be 0.74 and ranged between 0.23 and 0.98. This tells that there exists an option for farmers to increase the level of potato output on average by about 24 percent through exploiting the existing local practices and technical knowledge of the relatively efficient farmers. The estimated SPF model together with the inefficiency parameters shows that education level, land ownership, fertility status of potato plots and frequency of extension contact negatively and significantly affected technical inefficiency of potato production while land fragmentation positively and significantly affected it. Therefore, any development program aimed at improving technical efficiency of potato production should focus on the above mentioned factors.