Evaluation of Economic Efficiency of Wheat Farms in a Region of Bangladesh under the Input Orientation Model

ABSTRACT

This study pertains to a region of Khulna Division, a southwestern part of Bangladesh. The economic efficiency of wheat farms in this rural area was estimated through Data Envelopment Analysis (DEA) of farm level data for the year 2002. The overall mean efficiency score of the sample farms was 0.86 meaning that the economic efficiency of the sample farms was 14 percent below what can be achieved. Computed efficiency scores were subsequently regressed on explanatory variables using a Tobit analysis, to help in identifying inefficiency related factors. Nine explanatory variables were identified as being related to efficiency. Finally, how an inefficient farm becomes an efficient one was estimated and it was found that 34.29 percent of the TSP fertilizer was being over used in the farm levels of Bangladesh, which is the highest misallocation in the study area. To this end, a constant return to scale and input orientation model has been applied to a sample of 150 wheat farms.

Keywords :

• Economic efficiency
• DEA
• input orientation model
• Tobit analysis
• wheat farms
• Bangladesh

JEL CLASSIFICATIONS:

• C14
• D57
• D61
• O47
• Q19

Acknowledgements

The financial assistance of the State Scholarship Foundation (IKY), Greece is gratefully acknowledged. The authors wish to thank Dr Jahangir Alam, Member Director (AERS), Bangladesh Agricultural Research Council, Dhaka, Bangladesh for his valuable suggestion. The authors are also thankful to two anonymous referees for valuable comments on previous version of this paper. However, full responsibility for errors remains with the authors.

Notes

*Note: One US$ equivalent to Taka 52.624 as on August 2002.

^a * = P < 0.05,

^a *** = P < 0.01.

^a Note: One man-day is equal to 8 hours and

^b One pair-day is equal to 5 hours.

^a Note: Tractor and power tiller is being used for both land preparation and carrying purpose.

^b . Bullock labour cost per pair-day is included man works.

^c . One Euro is equal to 71.7676 Taka as on 31.08.2004.

*Significant at 10% level.

**Significant at 5% level &

***Significant at 1% level.