Abstract:
In Ethiopia, smallholder farmer’s production and profitability are tremendously low and
the growth of rural productivity has just barely kept rate with the development of the
population. This study was initiated to analyze technical efficiency of potato production
by smallholder farmers in Ambo district, West Shewa zone of Oromia region. The study
used a cross sectional data obtained from a field survey using structured questionnaire
from a random sample of 148 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, 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 that there were 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 by about 24 percent through exploiting the existing local practices and technical
knowledge of the relatively efficient farmers. The SPF model and inefficiency parameters
indicate that factors such as education level, land ownership, fertility status of potato
plots, frequency of extension contact, and land fragmentation have significant negative or
positive effects on the technical inefficiency of potato production
