Sharma, Shalik Ram
Description
This study attempts to provide a framework for a better understanding
of the technical and allocative efficiencies of individual
farms in paddy and wheat farming in the Rupandehi district of Nepal.
The input-output data obtained from a Farm Management Survey
of the Rupandehi district form the basis of this study. An unrestricted
form of the Cobb-Douglas production function is fitted to paddy and wheat
data separately. The function is estimated by two different techniques,
Ordinary Least...[Show more] Squares and Linear Programming. The function estimated by
the first approach is interpreted as the average production function and
expresses the output level which an average farm can obtain from a given
set of inputs. The function estimated by the second approach is interpreted
as the best or frontier production function, which expresses the
maximum output level that can be obtained by only the most efficient
farm from the combination of factors at the existing state of technical
knowledge. The major findings with regard to the production coefficients
are as follows:
1) The hypothesis that the sum of production elasticities
is not significantly different from unity could not be
rejected at conventional levels of significance. This
implies that there are constant returns to scale in the
production of paddy and wheat in the Rupandehi district.
2) For paddy, the estimated input coeffficients of the
frontier production function, with the exception of
manure, the coefficient of which is estimated to be insignificant, are almost identical with those of
the average function. The frontier function has
shifted neutrally outwards from the average function.
3) In the case of wheat, the estimated coefficients of
the frontier function are quite different from those
of the average function and therefore the frontier
function has shifted non-neutrally outwards from
the average wheat function.
The estimated production functions are used to calculate the
technical efficiency of the individual farms. For each crop, two
different vectors of technical efficiency are derived from the average
and the frontier production functions. The efficiency vectors are
calculated as the ratios of observed output to the level of output
estimated from the production functions. From this part of the analysis
it is found that:
1) There is no significant difference in the efficiency
ratings that are derived from the average and the
frontier production functions.
2) The efficiency in paddy production is not related to
the efficiency in wheat production. This result
raises a number of questions as to the meaning of
these efficiency indices and suggests lines for
further research.
An attempt is made to estimate the allocative efficiency of
different farm sizes in the use of farm resources at hand. On the
basis of the average production function, the marginal returns to factors of production are estimated for both crops separately. The
estimated marginal returns are then compared for large and small farm
sizes. The major finding is that small farms utilized more labour,
seed and manure relative to large farms, and large farms utilized more
land relative to other factors than did small farms. The question of
whether these differences in utilization rates represent allocative
inefficiencies still remains unanswered. To investigate it further
would require more adequate data on the relationship between relative
factor prices and farm size.
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