DEBRE TABOR UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTEMENT OF ECONOMICS

ANALYSIS OF TECHNICAL EFFICIENCY OF TEFF PRODUCTION:

IN CASE OF ENEMAY WOREDA

A PROPOSAL SUBMITED TO THE DEPARTMENT OF ECONOMICS,

IN PARTIAL FULFILLMENT OF THE REQUIRMENTS FOR THE
DEGREE OF BACHELOR OF ART IN ECONOMICS

PREPARED BY ID

1. Abate Talema……………………………………………….2478
2. Asnaku Seile……………………………………………….2429
3. Mahytem Animaw…………………………………………2396

ADVISOR: FEREDE M. (MSC)

DATE MARCH, 2023

DEBRE TABOR, ETHIOPIA

 ACKNOWLEDGEMENT
Writing of this research paper has been one the most significant academic challenges that we
have ever had to face. This research would not have been possible without the guidance and
the help of several individuals who in one way or another contributed and extended their
valuable assistance in the preparation and completion of this paper.

First, we would like to offer our sincerest gratitude to our advisor Ferede.M(MSc) for his
encouragement, supervision and his support from the starting to the end of this paper.

Similarly, we would like to offer regards to all of our families and friends who supported us
in any respect during the preparation of this thesis.

Lastly, we have a special thank for our friend Solomon who solved our big problem by giving
his personal computer.
 ABSTRACT
Ethiopian agriculture is characterized by low productivity. As a result the country has been a
sign of poverty and persistent of food insecurity. Teff is one of the dominant crops and its
productivity is low in Ethiopia. Teff production and its productivity levels are unsatisfactory
in east Gojjam zone in Enemay woreda. Therefore, this study will conduct in Enemay woreda
of east Gojjam zone during the production season of 2022/23. The aim of this study will be to
determine the level of technical efficiency of smallholder teff producers in the study area and
to examine the determinants of technical efficiency of teff production in the study area of
Enemay woreda. A two-stage sampling technique will employ to select 100 sample farmers
who are going to be interview for obtain the data of teff production during 2022/2023
production year. The study will use both primary and secondary data. The primary data will
collect using questionnaire and focus group discussion. The study will use cross-sectional
data of a year 2022/23. A Cobb-Douglas stochastic frontier production analysis approach
with Tobit model will apply to estimate technical efficiency and to examine the determinants
of efficiency of teff producing farmers. Both descriptive and econometric methods will be
employed in the analysing of this study. Descriptive statistics such as mean, standard
deviation, frequency and percentage will employ to analyze the data that will collect on
socio-economic and institutional characteristics of the sample households while econometric
methods such as regression will be used to undertake statistical tests.
 List of Abbreviation
OLS: Ordinary Least Square

DEA: Data Envelopment Analysis

FAO: Food and Agriculture Organization of the United Nations

GDP: Gross Domestic Product

GNP: Gross National Product

ML: Maximum likelihood

OLS: Ordinary Least Square

USD: United States Dollar

WFP: World Food Programme

 CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Agriculture is the most comprehensive word used to donate the many ways in which crops,
plants, and animals sustain the global human population by providing food and other
products (Harris, 2007). Moreover the Oxford English Dictionary (1971) define agriculture
as the science and the art of cultivating soil. According to World Bank, (2014), Agricultural
productions are dominated by smallholder farmers that operate on farms of less than one
hectare. Even though agriculture is the world most promising resource it accompanied by a
lower marginal productivity of labor that is estimated to be close to zero (WFP, 2010).

Ethiopia is landlocked in the horn of Africa, which has experienced a strong economic
growth over the past years. Agriculture in Ethiopia is the foundation of the country`s
economy, agriculture accounts for 37% of the gross domestic product (GDP) contributions,
one of the highest shares in sub-saharan Africa as well as 83% of exports earnings and the
sector employs 72% of total population(FAO, 2018). Growth in agriculture was one of the
major drivers of the remarkable economic growth recorded in Ethiopia in the last decade
(National Bank of Ethiopia, 2014). Topographic diversity in Ethiopia results various
farming system, that enabling crop and livestock production in the high land and agro
pastoralism in the low land. Ethiopia has one of the fastest growing economies in the world
and it is Africa’s second most populous country. The country has over 103 million
populations that growing at the rate of 2.5% the population is expected to double by 2060.
Although Ethiopia had annual GDP growth rate of 7%, still more than 33% of the
population live below USD 1.9 a day. Ethiopia`s landholdings are often fragmented into
small parts, and the average average farm size of less than one hector. It is characterized by
low productivity, periodic drought, soil degradation caused by overgrazing, deforestation,
high population density, and poor infrastructure, smallholder subsistence farming, and
instability of production mainly related with farming and traditional and primitive
production system (FAO, 2018).

Teff supports more than 60-75% of Ethiopia’s population as staple and co-staple food. The
demand for teff has increased noticeably due to its very attractive nutritional profile. Teff
farming practice varies in different growing areas. Teff has different variety currently
cultivated by many farmers are Magna, Sergegna, Bunign, kuncho, Qoreta… (Birhanu,
2018).

Among widely cultivated crops throughout Ethiopia teff is the former one. It appears in
every ones dish of everyday life in the form of injera. Because of its high nutritional value
teff will be the next super grain and injera would be the next super food in the world. Over
the past years teff production increases in terms of cultivated area and number of producers.
In Ethiopia teff is the second most important cash crop and it generating more than 500
 million USA dollar incomes per year for farmers. Teff exported in forign market in the
form of injera. Thr export of teff in the form of injera in 2015 were estimated around 10
million US dollar. The main injera global market destination was North America, Middle
East, and Europe (Fikadu, 2019).

In Ethiopia, teff is mainly produced in Amhara and Oromia Regions, with smaller
quantities in Tigray and SNNPR Regions. There are 20 major zones which produce in the
country. In Amhara Region, East Gojjam, North Gonder, West Gojjam, North Wollo, South
Gonder, South Wollo, Awi zones and North Showa are the major producers of teff
Moreover, more than 50 million Ethiopians use teff for different consumption. In recent
years, the crop is getting worldwide attention because it is a gluten free crop and it is being
served in the form of teff breakfast cereals, extruded products, teff banana bread, composite
breads, pasta, malt drinks, cookies, biscuits and cakes. Another potential application of Teff
includes utilization in the manufacturing of cosmetics and drugs (Mingizem, 2021).

Amhara region is the second largest teff producer in the Ethiopia next to Oromia region.
From the region east Gojjam is one of the major producer of teff. From East Gojjam zone,
Enemay woreda have great potential for teff production.

Therefore, this study will try to analysis the technical efficiency of teff production in
Enemay woreda.

1.2 STATEMENT OF THE PROBLEM

Agriculture plays a major role in Ethiopian economy and it accounts for 36% of the total
GDP. Crops are the major agricultural commodities on which Ethiopians depend for their
daily food consumption. Though agriculture is the back bone of the Ethiopian economy, the
improvements made regarding crop productivities are not sufficient (Bamlaku, 2021).

Improvement In productivity can be success in two ways. Either by improve technological

level, which represented by an upward shift in production frontier or by improving technical
efficiency of the producers, which represents the physical performance of producers.
Reducing inefficiency or increasing efficiency is the best way to enhance productivity.
Inefficiency is inability of the farm to produce maximum possible output with a given level
of inputs. Since level of efficiency is differ from farmers to farmers and place to place, there
is possibility to increase productivity by improving efficiency with in the available resource
and without developing new technologies (Mogos, 2020).

Mastewal Demil Kassa (2017) on his study ``Smallholders’ technical efficiency of teff
production in Ethiopia``, The average estimated technical efficiency of small holder farmers
ranges from 0.13 to 0.92%, with mean efficiency of 73%. This implies that farmers
productivity is inefficiency in production of teff (Mastewal Demil Kassa, 2017). Moreover as
studied by Wondaferahu Teff producers in Ethiopia are technically inefficient, the average
efficiency of teff producers was calculated about 73% and distribution of technical efficiency
ranges from 13% to 92% with about 5.4% of household below 50% and about 72%
household above mean efficiency. This shows there is high variation of technical efficiency
between smallholder Teff producers in the country. Even if most households produce above
mean efficiency level there is also possibility of increasing efficiency by about 27%
(Wondaferahu, 2019).

In areas where there is insufficient production trying to introduce new technology may not
bring the expected impact, unless factors associated with inefficiency among farmers are
identified. The existence of inefficiency in production comes from inefficient use of scarce
resources. The measurement of efficiency in agricultural production is important issue for
agricultural development and it gives useful information for making relevant decision in the
use of these scare resources and for reformulating agricultural policies ( Mogos, 2017).

A large number of studies on farm productivity in Ethiopia from different regions and sectors
found that efficiency exists (for example, Kindie, 2020; Yimenu kassa, 2017; Mustefa Bati,
2017; Temesgen Fur, 2018; Aschalew, 2020; LegeseNado, 2021 ; Alemayehu, 2010;
Hoseana, 2015) these previous studies focused on the study of technical efficiency of other
cereal crops and there is little attention to the analysis of technical efficiency of teff producers
in Ethiopia.

Even though there have been various empirical studies conducted to measure technical
efficiency of teff production in Ethiopia, (for example, Mogos, 2018; Mastewal Demil Kassa,
2019; Mingizem,2021; Fikadu, 2019) but there is no similar studies that undertaken on
technical efficiency of teff producing household in the study area. Moreover, those studies
uses panel data but this study is going to uses cross-sectional data. Since social development
is dynamic, it is important to update the information based on the current productivity of
farmers and the study is investigated for the first time in the study area. Therefore, the study
will fill this information and knowledge gap at the study area.

1.3 Research Questions of the study

The study try to answer the following questions

1. What are the determinants of technical efficiency of teff production in Enemay woreda?

2. What is the level of technical efficiency of teff production in Enemay woreda?

1.4 Objective of the study

1.4.1 General objective
The main objective of the study is to analysis the technical efficiency of teff production in
Enemay Woreda.

1.4.2 Specific objective

 To estimate the level of technical efficiency of teff production in the study
area.
 To examine the determinants of technical efficiency of teff production in the
study area.
1.5 Significance of the study
A technical efficiency study plays a significant role in providing useful information regarding
to technical inefficiencies in production and helps to identify those factors, which are
associated with inefficiencies that may exist. It may help to indicate the possibility of
increasing production without increasing the consumption of inputs or decreasing the level of
inputs. This will help to reduce total production cost without decreasing the level of output.
Since improving smallholder farmers’ efficiency is an alternative source of growth of the
agricultural sector, such studies will benefit the economy (Mogos, 2018).

Studying about the technical efficiency improvements of farmers has great advantage, when
the sources of inefficiencies and efficiency are well identified. If sources of inefficiencies and
efficiencies are well identified in Enemay woreda, the government and agricultural planning
body will improve the level of productivity of teff production in the study area. Therefore, the
study will generate symmetric information on the issue which helps to design different
policies for the improvement of efficiency and it will determine the extent of inefficiency in
the study area. Since the study is going to be done for the first time in the study area, I it will
provide the information for the researchers who are interested in conducting different
research works on the improvement of teff production as well as it will be help full for the
investigation associated with the study area. At the end the study will improve the
productivity of teff producers by determining those constraints that hidden the efficiency of
farmers.

1.6 Scope and Limitation of the study

The study is conduct in Enemay woreda district of east gojjam zone of Amhara Region. The
study will undertake to analyse the determinants of technical efficiency of teff production and
to identify constraints of technical efficiency of teff production in Bichena woreda during
2022/23 production year. The study will use cross-sectional data. The data will collect from
teff producer farmers based on our sample size. Bichena Woreda is select for our study
because of its potentiality of teff production. Since the study will be conducted using cross-
sectional data, the research may be affected by the specific climate of the year in the study
area. Thus, the results of cross-sectional data may not show the change over time. As we
know smallholder farmers do not keep records of inputs and output. Therefore, survey of
smallholder farmers by itself will be difficult and to get reliable data especially on
smallholder farmers land holding, volume of production, the amount of fertilizer they use and
other variables which have socio-economic implications may not always be free from error
since smallholder farmers can only remember the most recent information.

1.7. Organization of the study

The proposal includes three chapters. The first Chapter incorporate the background of study
and introduction parts. Chapter two literature reviews including theoretical and empirical
reviews, and Chapter three discusses the methodology, including methods of data collection
and analytical techniques that we will use to analyse the data.
 CHAPTER TWO: REVIEW OF LITERATURE
2.1. Theoretical Literature Review
2.1.1. Teff production
Teff is one of major staple crops grown in Ethiopia. It is more preferable than other staple
crops due to its higher price in market, adaptability to heavy moisture and waterlogged
conditions, and its storage capacity for long period of time (Moges, 2020).

Teff is the most indigenous crops for Ethiopia. It is one of the main source of food
production, nutrition security, and farm income in Ethiopia. And it is also a significant part of
Ethiopia’s cultural heritage and national identity (The Guardian,2013)

It has believed that teff has been domesticated since 4000 to 1000BC. Ethiopia is the center
of the origin and diversification of teff over the world (Tadele and Hibistu, 2021)

The word teff likely originated from the Amharic word “tefa” which means lost, which is
difficult to find when it is dropped because it has tiny size, while other evidence states that it
was derived from the Arabic word “tahf”, a name given to a similar wild plant used by
Seimites of south Arabia during the time of food insecurity (Abraham R, Dechassa N, Assefa
K;2018).

Teff is one of the most significant staple crops that used to get prepare ‘’enjera’’ which is the
primary public dish in Ethiopia. It is one of the main yields of farm income and food security
in Ethiopia. When the individual income increase the demand for teff production also rise in
the same direction because it has high income elasticity (Berhane G, Paulod Z, Tamru S,
20111).

Teff has been a basic means of food consumption for most of individuals in Ethiopia. Unlike
wheat and maize production teff remains the staple crops in Ethiopia and Eritrea with its
strength to resist difficult conditions, for example, dry seasons, water lagging and common
pests and diseases (Tadele and Hibistu, 2021).

Teff is the most important crop in terms of cultivation area and production value. In Ethiopia
it is a major staple food. In 2017 teff accounted 24% of nationwide grain cultivation area and
nearly half of the small holder farmers grew it between 2004 and 2014. It is the most
necessary cereal in Ethiopia in terms of agricultural land use and total market value. It is
adapted to a wide range of environments and is presently cultivated under diverse agro
climate conditions. The crop is crucial for income, food and nutrition security across the
country and is grown by over 6.5 million small holder farmers (Esubalew, Tewabe, 2021).

According to Food and Agricultural Organization, teff is the only cereal crop that Ethiopia
has a comparative advantage over international trade (FAO,2021).
2.1.2. Concepts of Technical Efficiency
Efficiency is the ability of farms production to attain optimum level of output from a given
level of bundle of input (Farrell, 1957). Moreover, efficiency is the act of achieving good
result with little extension efforts. It is the act of saving material and human resource and
coordinating these resources to achieve better management goal (Beckhman et al, 2010).

Efficiency means the realization of a production goal without waste. It can be measured by
the two basic methods, the classical approach and frontier approach. The classical approach
termed as partial productivity measure, the approach is based on the ratio of output to a
particular input. Because of the drawbacks of this approach economists develop advanced
econometric and linear programming methods for analyse efficiency. The frontier measure of
efficiency describes that the firms which operating on production frontier are efficient and
those firms which lies below its production frontier is considered as measure of inefficient
(Aschalew,2020).

The concept of efficiency is considered with the relative performance of processes used in
transforming given inputs into output. Farrell (1957) identified three types of efficiency.
These are technical efficiency, allocative efficiency (price efficiency) and economic
efficiency (overall efficiency). Technical efficiency refers to use the minimum feasible
amount of input to produce a given level of output, or it is the ability of decision making units
(individuals, firms, and government) to produce the maximum level of output from a certain
amount of input. Allocative efficiency is the ability of decision making units to use inputs in
optimal proportions, with in their respective price and production technology. It is the ability
of firms to use inputs in proportions that minimize production costs with a given input price.
Both technical and allocative efficiency (price efficiency) in production together formulate
the economic efficiency. Economic efficiency is the product of technical and allocative
efficiencies. Therefore; decision making units will never reach on economic efficiency unless
both technical and allocative efficiency are fulfilled (Ferrell,1957).

Technical efficiency is the ability of the firm to produce the maximum output from its
resource. Within the same level of input and technology, when the firm produce higher level
of output than other firms that firm is technically efficient (Karl D,1990).

Mainly some economists and scholars use technical efficiency and productivity
interchangeably. But actually they are not the same. Production efficiency means minimizing
the cost by adjusting the level of mix of input that we used, on the other hand technical
efficiency is output maximization from a given mix of input (Palmer,1999).

There are some ways of measuring efficiency of the farm. From those ways of measuring the
simplest way of measuring efficiency of the farm could be yield per hector. The other
technique is to use the conventional econometric analysis (Burhan, Ceylan, and Hatice,
2009).

Productivity can be increase either by technological change or by technical efficiency.

Specifically technical efficiency is relative measure of marginal ability for a given
technology. While technological change is a change that evaluates effect in productivity from
the innovation of new production practice. Generally technical efficiency derived from
improvements in decision making which related to knowledge, experience, and education. On
the other hand technological change related with research and technology advancement
(Daniel Solis, 2014).

2.1.3. Approaches to Efficiency Measurement

There are two approaches that used to measure efficiency: Output oriented and Input
oriented. They deal about by how much output could be increase from a given level of input
and by how much can the quantity of input reduced without changing the level of output that
was produced respectively (Coelli and Battese, 2005).

 Input Oriented Efficiency Measures

The input measure of efficiency focus on by how much quantity of inputs reduced without
changing output level. The concept of input-oriented measures of efficiency of a firm which
uses two inputs X1 and X2 to produce a single output y, under the assumption of constant
return to scale can be illustrated in Figure2. Two inputs X1 and X2 are represented on
horizontal and vertical axes respectively. EE* represents an iso-quant of a fully efficient
firm. All points on this iso-quant represent technically efficient production. Assume a firm is
producing at point A as shown in Figure 2; this firm produces the same level of output as is
produced by the fully efficient firm. To define the technical efficiency (TE) of this firm, a
line is drawn from the origin to the point A. This line crosses the iso-quant at the point C. In
the case of a fully efficient firm, y* amount of output (y) is produced using inputs (X1 and
X2) at point C whereas in case of the observed firm, operating at A, additional inputs are
used to produce y* amount of output (y). Therefore, observed firm, operating at A, does not
use inputs efficiently. The technical efficiency of the observed firm can be defined as the
ratio of the distance from the point C to the origin over the distance of the point A from the
origin

TE= OC/OA

The distance CA represents the technical inefficiency of the observed firm, which is the
amount by which all inputs could be proportionally reduced without reduction in output. The
value of TE lies between 0 and 1. A firm is technically efficient if it has TE equal to 1. If the
value of TE is less than 1, the firm is technically inefficient. If input prices are given,
allocative efficiency (AE) can also be calculated. A line DD* is drawn tangent to the iso-
quant EE* at the point C*. The line DD* represents an isocost line showing all possible
quantities of the two inputs, given their relative market prices that would cost the same
amount to the firm. Slope of the iso-cost line represents the input price ratio. For output
quantity produced at point C, the best use of inputs is at point C*, because it represents the
minimum cost. The allocative efficiency of the firm is defined as:

AE=OB/OC

At point C* a farm is both technically and allocatively efficient. Distance BC represents the
reduction in production cost that would occur if production were to occur at allocatively and
technically efficient point C*, instead of at technically efficient but allocatively inefficient
point C. Value of allocative and economic efficiency lies between 0 and 1. A value of 1
indicates that the firm is allocatively and economically full efficient while value less than 1
indicates that the firm is allocatively and economically inefficient. The economic efficiency
(EE) is defined as the product of technical and allocative efficiency (Coelli et al, 1998).

EE= TE * AE

Standing from the above we can have:

EE=OB/OA

Figure 1: Input-oriented measures for technical, allocative and economic efficiencies.

Source: from Coelli et al., (1998).

Value of economic efficiency is bounded between 0 and 1. Value of 1 indicates that the firm
is economically fully efficient while value less than 1 indicates that the firm is economically
inefficient (Moges, 2020).

 Output oriented efficiency measures

The output oriented measures of efficiency focuses on the change or improvement of the
level of output with in a given level of inputs. The concept of outputoriented Measures of
efficiency of a firm producing two outputs (y1 and y2) with one input can be illustrated using
Figure 1. Two outputs y1 and y2 are represented on horizontal and vertical axes respectively.
EE* is a production possibility curve showing different combinations of two outputs (y1 and
y2) produced using a given level of input (X). EE* production possibility curve represents a
technically efficient combination. Any firm that is producing on this curve is said to be a
technical efficient if not its inefficient. A firm that is producing at point B is technically
inefficient firm because it lies below the production possibility curve EE* that represents the
upper bound of production possibilities. To define the technical efficiency of the observed
firm producing at point B, a line is drawn from the origin to the point B. This line crosses the
production possibility curve at point C. The observed firm uses the same input level as is
used by the fully efficient firm, operating at point C. The technical efficiency of the observed
firm is defined by the ratio of the distance of the point B to the origin over the distance from
the point C to the origin. TE = OB/OC The distance BC represents the level of technical
inefficiency. It is the amount by which outputs could be increased without requiring extra
inputs (Coelli et al, 1998).

Figure 2: Output-oriented measures for technical, allocative and economic

efficiencies.

Source: from Coelli et al., (1998).

TE = OB/OC

AE = OC/AD

EE = OB/AD

2.1.4. Models of Efficiency Measurement

The original frontier function was introduced by Ferall(1957). Due to its consistency with
definition of production and cost function, the frontier function methodology has become a
widely used tool in applied production analysis. There are two different groups of technique
that have been used to measure technical efficiency: non parametric linear programming
technique and the parametric stochastic frontier approach (Daniel Solis, 2014).

Non Parametric Frontier Model

Non parametric approach is a mathematical programing model and also called Data
Envelopment Analysis. It is necessary for the calculus of efficiency relative to constructed
frontier. Usually multiple Outputs and Inputs are handled by the non-parametric model
known as Data Envelopment Analysis (DEA) (Moges, 2020).

The Data Envelopment Analysis (DEA) is both non-parametric and non-stochastic. It has its
own several advantages from those advantages; it does not require a prior specific functional
form for the production frontier because it doesn’t necessitate any functional form to be
specified for the frontier methodology and doesn’t require any distributional assumption for
the technical efficiency term. In addition, Data Envelopment Analysis (DEA) handles
multiple inputs and outputs without any aggregating and it is also identify which is the best
for every decision-making unit under consideration of the output or cost gap of inefficient
firms to be fully efficient. Although Data Envelopment Analysis (DEA) has such advantages
it has also its own drawbacks; a frontier estimated by DEA is likely to be sensitive to
measurement errors and other noise in the data. At the first stage of DEA hypothesis testing is
impossible, moreover the main criticism of DEA is it consider all deviations from the frontier
are inefficient (Yimenu Kassa, 2017).

Since Data Envelopment Analysis enables us to studying the relation between multiple input
and multiple output, it had been used in multidimensional situations in which there is occur
more than single input and more than one effect (Justyna Kulik, 2017).

The mathematical problem of DEA is to find a set of weights that maximize the output
expansion of the producer under consideration, under the constraint that the producer cannot
be more efficient than the “best” producer (FAO, 2017).

Data Envelopment Analysis (DEA) doesn’t consider random error term. The distribution of
an error term is not subjected to Data Envelopment Analysis. Since Data Envelopment
Analysis doesn’t consider such econometric variables its measurement may not be efficient
and it will be biased (Moges, 2020).

Max 𝜑 λ Ф

Subject to: -yi +Y λ ≥ 0

: Фxi - X λ ≥ 0

:NIλ=1, λ ≥ 0

Where Ф is a scalar, NI is convexity constraint and λ is N x 1 vector of constants. Y

represents output matrix and X represents the input matrix. The value of Ф will be the
efficiency score for the ith firm. This linear programming problem must be solved N times,
once for each firm in the sample. A Ф value of 1 indicates that the firm is technically efficient
(Moges, 2020).

Parametric Frontier Approach

Parametric approach is the one which presents a function including explicit parameters like
Cobb-Douglas and Tran-slog function. It uses different econometrics and non-econometrics
techniques to estimate production or cost frontier parameters (Belete, 2020).

The parametric model classified into Deterministic and Stochastic models. The deterministic
model assumes that any deviation from the frontier is because of its inefficiency, while the
stochastic approach allows for statistical error. The deterministic frontier function can be
solved either by using econometrics techniques or mathematical techniques, but the stochastic
frontier specifications are estimated only by econometric techniques (Moges, 2020).
 ¬ Deterministic Model
Deterministic model is one of the most commonly used efficiency measurement which states
that any deviation from the frontier considered as technical inefficiency. This method can be
estimated by using linear programming or econometric techniques such as Corrected
Ordinary Least Square (COLS). but this model have drawback on considering the error term
as the source of inefficiency, this will exaggerates the level of technical inefficiency
especially when there is measurement error (Solomon,2014).

The fundamental problem with deterministic frontiers is that any measurement error, and any
other source of stochastic variation in the dependent variable, is embedded in the one-sided
component making the resulting technical efficiency estimates sensitive to biased (Daniel
Solis, 2014).

The deterministic model can be estimated using OLS. In this case, the slope parameters are
estimated consistently, but the intercept is biased. Consistent estimate of a can be obtained by
shifting the OLS line upward so that the largest adjusted residual is zero. If the true error term
is composed of a normally distributed noise term and a non-negatively distributed
inefficiency term, then OLS is not maximum likelihood but still produces unbiased and
consistent estimates of the slope parameters. Hence, there will be minor differences between
the estimated slope parameters from the stochastic frontier and OLS regressions. The
deterministic specification, assumes that all deviations from the efficient frontier are under
the control of some circumstances out of the agent’s control that can also determine the
suboptimal performance of units. Regulatory-competitive environments, weather, luck, socio-
economic and demographic factors, uncertainty, etc., should not properly be considered as
technical efficiency. The deterministic approach does so, however. Moreover, any
specification problem is also considered as inefficiency from the point of view of
deterministic techniques. On the contrary, stochastic frontier procedures model both
specification failures and uncontrollable factors independently of the technical inefficiency
component by introducing a double-sided random error into the specification of the frontier
model (Moges, 2020). The model assumed as:

Yi = α +𝛽 xi – Ui
Where Ui > 0……represents inefficiency.

The main criticism of the deterministic frontier model is that it does not account for possible
influence of measurement error and other noise upon the shape and positioning of the
estimated frontier. All observed deviations from the estimated frontier will thus, assumed to
be the result of technical inefficiency. Therefore, the method sums up all the effects of
exogenous shocks together with measurement errors and inefficiency. Due to the limitations
of the deterministic parametric frontier approach led to the development of the other variant
of the deterministic measurement approach (Yimenu Kassa, 2017).

¬ Stochastic Model
This approach entails measuring efficiency based on an econometric estimation of a
production function that explicitly includes an inefficiency component. This method assumes
a specific type of production function. However, its account of inefficiency is more explicit
and general than deterministic method (FAO, 2017).

The stochastic frontier production model addresses the problem those can`t addressed by
deterministic model by incorporating a composed error structure with a one-sided symmetric
term and a two-sided component. The one-sided component reflects inefficiency, while the
two-sided error captures the random effects outside the control of the production unit. Unlike
the deterministic model, the stochastic approach distributes the error term in to error
component (v) and the stochastic component (u). In addition to this stochastic approach have
advantage over the deterministic approach, since this model allows estimating the standard
error and testing for the hypothesis, which the deterministic model fails to full fill because of
the violation of the maximum likelihood regularity conditions. Stochastic frontier production
function can be estimated by using Maximum likelihood (ML) or COLS method. Although
COLS is simple for application but the ML method is asymptotically efficient and hence
recommended to be used than COLS (Daniel Solis, 2014).

Stochastic frontier model will express as follow:

Yi= α +𝛽 xi +vi –ui

Yi……is the observed outcome.

α +𝛽 xi +vi…..is the optimal frontier.

𝛽 xi….is the deterministic part.

Vi….is stochastic part.

Ui….is the amount by which the observed individual fails to reach the optimum.

This model acknowledges the fact that factors, which are outside the farmer`s control, it can
also affect the level of output. So it made possible to find out whether the deviations in
production from the frontier output is due to firm specific factors or due to external random
factors. And the primary advantage of the stochastic frontier production function is that it
enables one to estimate farm specific technical efficiencies (Mogos, 2020).

2.2. Empirical Literature Review

The age of the house hold has a positive impact on efficiency production. This means the
older farmers tend to be more efficient than young farmers. The reason behind this it that
farmers become skill full as they age increase due to cumulating farm experience (Mogos,
Bosena, Hassen , 2020). As study by Alemayehu also reported the same result that age means
work experience and it improves efficiency (Alemayehu, 2010). Moreover as studied by
Legese, Mitiku, and Bealu age of the house hold has negative impact on efficiency
production. This result explained in terms of adoption of modern technologies. As they stated
older farmers are less likely to have contact with extension workers and are incentive to adopt
new techniques and modern inputs. But, younger farmers are more likely to be used greater
opportunities for formal education, more skilful in the search for information and the
application of new techniques. This will be the reason why younger farmers are more
technically efficient than older farmers (Legese, Mitiku, and Bealu, 2021).

Education increases the ability and willingness of farmers on the use of improved technology.
Education measured in years of formal schooling, as expected, the sign of education is
positive effect on technical efficiency. This implying that less educated farmers are not
technically efficient than those that have relatively more education because, educated farmers
have the ability to use information from various sources and can apply the new information
and technologies on their farm that will increase the outputs of teff production. In general,
more educated farmers are able to perceive, interpret and respond to new information and
adopt improved technologies such as fertilizers, pesticides and planting materials much faster
than their counterparts (Mogos, Bosena, Hassen , 2018). As study by Legese Lado also
reported the same result that education is a socio economic variable and it improves
efficiency (Legese Nado, 2021).

Credit is an important element in agricultural production systems. It transfers the purchasing

power from creditor to farmers. Credit increases the farmer efficiency because it temporarily
solves shortage of working capital. Farmers who get more amount of credit at the given
production season from either formal or informal sources are more efficient than those who
get less amount of credit. Credit affects efficiency of farmers positively. This implies that
credit availability shifts the cash constraint outwards and thus enables farmers to make timely
purchases of inputs and the use of agricultural inputs leads to more efficiency (Mogos, 2018).

Farm size is measured as total land cultivated by the farmer including those rented and
shared. Farm size affects efficiency negatively. Within the given level of technology as the
farm size of the farmers increases the managing ability of households will decrease. This
reduces the efficiency of farmers. The study shows that a household operating on large area is
less efficient than a household with small land holding size. This is because of when the
cultivated areas become large and large farmer might not be able to carry out important crop
husbandry practices that need to be done on time. As a result, with increase farm holding size
the technical inefficiency of the farmer might increase. And from those variables which affect
technical efficiency off teff production: Age of the household, education level of farmers,
training and credit access have statistically significant impact on technical efficiency of teff
production (Mogos, 2018).

According to the study of Mingizem(2021) on his work technical efficiency of teff

production in Amhara region, a total of four input variables were used in the estimation of the
production functions. As far as the Maximum Likelihood Estimation results is concerned, all
variables except improved seed were found to significantly and positivly affect output,
meaning that an increase in one of the inputs will enhance production, keeping everything
constant. The coefficients of local seed and hired labor, family labor, number of oxen, and
total Fertilizer (DAP and UREA) were significant at 1% level of significance. This informs
that they were significantly different from zero and hence these variables were important in
explaining teff production in Ethiopia (Mingizem, 2021).

2.3. Conceptual Frame Work

According to the above literature, technical efficiency of cereal crop is affected by several
factors. The main task in this framework formulation is to identify the most important factors
affecting technical efficiency of teff production. From our literature we develop the
conceptual framework of the Study as follow:

Exp
erienc
age
e

Education

Non-farm Income
Technical efficiency of teff
production
Credit Family size

Training
Gender

Figure 3: conceptual frame work

 CHAPTER THREE: METHODOLOGY OF THE
STUDY
3.1. Description of the Study Area
The study will investigate in Enemay Woreda. Enemay is one of the woredas found in
Amhara region of Ethiopia. It is located at Eastern Gojam zone about 265 km from Bahir Dar
and lies between 10* 39’59.99’’ latitude and 32* 88’0.00’’ longitudes. The annual mean
temperature of the area ranges between 15.1-27.5 *C and the annual mean rainfall ranges
1201-1800 mm. Enemay is bordered on the south by Dejen, on the West Debaytelatgen, on
the north by Enarji Enawga and on the East by Shebelberenta. The administrative center of
Enemay woreda is Bichena.

According to CSA, Enemay woreda has total population 180,658 of which 89,394 (49.5%)
are male and 91,564 (50.5%) are female. Out of the total population 11,853 (6.56%) are
urban dwellers and the remaining 168,804 (93.44%) are rural dwellers. Enemay woreda has a
population density of 237.0 people per square kilometre. The district has a total area of
76,265 square Kilometre. Among the available land 52,044 hectors are covered bay farm.
Under the district there are 29 kebeles among those 29 kebeles only 2 kebeles are urban the
rerst 27 kebeles are rural. The agro climate feature of the district is characterized as 88%
Woyna dega, 7% Dega, and the remaining 5% are kola (Enemy woreda

The economy of the woreda is depending on agricultural products like teff, maize, barley,
bean, and vetch are main products. From those crops teff covers 50% crop production of the
woreda. As I mention the above 27 kebeles of the woreda are rural from those 27 rural
kebeles only 2 kebeles are not participating in the production of teff and the remaining 25
kebeles are teff producers.

Figure 4: Study area location map of East Gojjam zone, Enemay woreda
3.2. Data Types, Sources and Methods of Data Collection
In order to analyse technical efficiency of teff production in Enemay woreda the study used
both primary and secondary sources of data. Both primary and secondary data as well as
quantitative and qve data were collected for this study. To attain the objective of the study,
both ualitatidata on the variables which affect technical efficiency of teff production and
socioeconomic characteristics of farmers were collected by using interview. The primary data
was collected using questionnaire and focus group discussion. For this study the researcher
formulated questionnaires and it was responsible for the collection of those primary data. The
study used cross-sectional data of a year 2022/23 production year.

3.3. Sampling Technique and Sample Size

In order to select sample households, sampling technique was the combinations of purposive
and simple random sampling techniques. Out of teff producer woredas in East Gojjam zone,
Enemay district is purposively selected due to long year experience in teff production and its
productivity of teff crop. In this study two stages of samplings are going to be applied. In the
first stage, out of the total 25 teff producer kebeles, four kebeles was selected by purposively.
Those kebeles ware Woynam, Woyra, Dimma, and Endeshignt. In the second stage based on
our sample size teff producing farmers were selected by using simple random sampling
technique. The number of household in Woynam, Woyra, Dimma, and Endeshignt are 1677,
1625, 1332, and 1688 respectively. By summing the total population of our sample size N is
6322. The sample size for the study was determined based on Yamane formula (1967). The
simplified formula provided by Yamane. The simplified formula used to determine the
sample size of the study and it was specified as follows.

N
n = 1+ N (e 2)

Where: n = sample size

;N = total number of teff producing farmers in such kebeles (6322)

:e = level of significance (10%).

n = 6322/ 0.001*6322+1≈100

n= 100 households and we will allocate these sample for each kebeles

Therefore, from Woynam (18), Woyra (31), Dimma (28), and from Endeshignt (23), totally
100 respondents were selected randomly for 2022/23 cropping season.
3.4. Method of Data Analysis
Both descriptive and econometric method was employed in the analysing of this study.
Descriptive statistics such as mean, standard deviation, frequency and percentage was
employed to analyze the data that will collect on socio-economic and institutional
characteristics of the sample households while econometric methods such as regression
would use to undertake statistical tests. The econometric analyze were followed some process
and the data was analyzed by using stochastic frontier approach and it applied the tobit model
to analysis socio-economic and some institutional variables. According to Coelli (1996) the
two-stage MLE method leads to estimates that are less efficient than single stage estimates.
Therefore, in this study a single-stage maximum likelihood estimation procedure was
employed to obtain the parameter coefficients of the efficiency effects.

3.5. Model Specification

As we mention in the literature review, The SFM has significantly contributed to econometric
modelling of production and the estimation of technical efficiency in many research fields,
especially in agricultural researches. Thus, the study will use the stochastic frontier functional
approach regarding this, the other issue surrounding parametric frontiers is relates to the
choice of functional form. Among the possible algebraic forms, Cobb-Douglas and the trans-
log functions have been the most widely used functional forms in most empirical production
analysis studies. Each functional form has its own advantage and limitations. Some
researchers argue that Cobb-Douglas functional form has advantages over the other
functional forms in that it provides a comparison between adequate fit of the data and
computational feasibility. It is also convenient in interpreting elasticity of production and it is
very parsimonious with respect to degrees of freedom. So, it is widely used in the frontier
production function studies. In addition, due to its simplicity features, the Cobb-Douglas
functional form has been commonly used in most empirical estimation of frontier models
(Belete, 2020). Moreover, several studies specifically farm efficiency studies, have used the
Cobb-Douglas functional form despite its limitations. On the other hand, the trans-log
functional form imposes no restrictions upon returns to scale or substitution possibilities.
However, the problem of degrees of freedom and multicollinearity is a serious problem in
trans-log production function (Coelli et al., 1998). As a result, taking the advantages and
disadvantages of both functional forms into consideration, in this study, the Cobb-Douglas
production frontier functional form will fit for estimation of the level of technical efficiency
of farmer’s teff production in the study area. Based on the studies (Negese Tamirat and Sanait
Tadele,2020; Moges,2017; Belete, 2020) The Cobb – Douglas form of stochastic frontier
production is specified as follow:

𝑙𝑛 Yi = β0 + βi ∑ lnx i I + εi

It becomes;
 𝑙𝑛Yi = β0 + β1𝑙𝑛X1 +β2𝑙𝑛X2 +β3𝑙𝑛X3 +β4𝑙𝑛X4 +β5𝑙𝑛X5 +Vi - Ui

𝑙𝑛 Natural logarithmic function, Yi Amount of Yield of production of Teff in quintal, β0

Constant value, βi Parameter to be estimated, X1 Farm size or area per hectare, X2 Amount
of labour (man-days), X3 Fertilizer used in Kg, X4 Seed in Kg, X5 Oxen, and εi Composed
error element.

We will use the Battese and Coelli (1996) inefficiency model to estimate TE. The function
determining the technical inefficiency effect is defined in its general form as a linear function
of socio-economic and management factors. The model is specified as:
k=13
Ui = 0 + ∑ k Z jk + wi
k=1

Ui = 0 + 1𝑙𝑛Z1 +2𝑙𝑛Z2 +3𝑙𝑛Z3 +4𝑙𝑛Z4 +5𝑙𝑛Z5 +6𝑙𝑛Z6 +7𝑙𝑛Z7 +8𝑙𝑛Z8 +9𝑙𝑛Z9

+10𝑙𝑛Z10 +11𝑙𝑛Z11 +12𝑙𝑛Z12 + 13𝑙𝑛Z13 +wit.

The inefficiency effect (Ui); Age of household head (Z1); Sex of the household head (Z2);
Education level of the household heads (Z3); Experience of house hold heads (Z4); marital
status (Z5); Distance from farms (Z6); Household size (Z7); Proximity to the market (Z8);
Non-farm Income (Z9); Training (Z10); Membership in local organization (Z11); Land
fragmentation (Z12), Credit (Z13), while wi error term.

The parameter of stochastic frontier production function and the model for technical
efficiency effect first run the production function and then in second stage tobit model will
run to estimate by the maximum likelihood method to assess the determinants of technical
efficiency.

The technical efficiency of production for the production of Teff can express as follows:

𝑇𝐸𝑖𝑡 = exp(−𝑢𝑖) = exp(−Z𝑖 𝛿 ′ − W𝑖)

This study will use tobit model to identify determinants of technical efficiency because the
dependent variable ‘technical efficiency’ is a censored variable with an upper limit of one.
The specification of the model is defined as

𝑇𝐸𝑖 = 𝑋𝑖 𝐵𝑖 + 𝑢

𝑇𝐸𝑖 ∗ = 𝛽 ´ 𝑋𝑖 + 𝜀𝑖

Where 𝑇𝐸𝑖𝑡 ∗ = 𝑇𝐸𝑖 𝑖𝑓 𝑇𝐸𝑖 ∗ > 0 𝑇𝐸𝑖 = 1

Where ε i = N (0, σ 2), TEi is the estimated technical efficiency of the Teff farmer; X i is the
explanatory variables and β are unknown parameters .the study will estimate the Tobit model
with the help of STATA software package
3.6. Description of the Variable

In order to analysis technical efficiency of teff production in Enemay woreda we will use
both continuous and discrete variables based on economic theories and the findings of
different empirical studies. Based on previous studies and socio-economic conditions of the
study area, the following factors will be expected to determine in/efficiency of sample
farmers.

Output (Y): This is the dependent variable of the production function. It is the total amount
of teff produced expressed in terms of physical output of teff in quintal (Qt) of sample
households.
Inputs: This refers to explanatory variables used in the estimation of production functions
Farm size: This refers to the physical unit of land area under teff crop cultivation expressed
in hectare. Basically, land is the main factor of teff production and thus the expected
coefficient will be positive.
Labour: This represents the total labor (family, exchange and hired) utilized in various farm
activities (plough, sowing and fertilizer application, weeding, harvesting and threshing). The
available labour related positively to production efficiency.
Fertilizer: This variable is measured by adding quantities of fertilizer applied per household
in kilogram during 2022/23 teff production year. Fertilizer is expected to increase the level of
production and thus its expected sign is positive

Seed: It refers to the amount of teff seed and measured the quantity of teff seeds in kilograms
(kg) used by each smallholder farmer in 2022/23 cropping season. It is the usage of both
improved variety of teff seed and local teff seeds. The expected sign of seed on affecting teff
production is going to be positive.

Oxen: Draught power used for different farming activities for teff production is measured in
oxen day. Hence, oxen power will measure using the total amount of oxen days allocated for
different activities of teff production in 2022/23 production season. The expected coefficient
will be positive.
Age: This is measured by the age of household head in years. Various literatures have shown
that as age of household increases, farmers tends to adapt the environments, get more
experienced and challenge the problem he/she faced in the past. The degrees of inefficiency
are supposed to declines as age of household increases. Therefore negative coefficient is
expected to inefficiency effect.
Sex of the household head: is a dummy variable representing the sex of household head
taking a value of 1 for male headed households and 0 for female headed households. Even
though women play a substantial role in agricultural activities, there are still tasks that are not
be doing by women. Hence, male headed households will expected to be more efficient than
female headed households.

Marital status: The dummy variable for adoption of marital status assigns the value of 1 if
the respondents are single, 2 if they are married, 3 if they are widowed and 4 if the
respondents are divorced.

Education of the household head: It is continues variable which is determined by the year
of schooling of the household head. This is used as a proxy variable for managerial ability of
the household head. It is assumed that through education, the quality of labour is improved
and he/she become active to adopt new technologies. The role of education toward improving
farmers` efficiency is now widely accepted, in that it enables them to understand the
socioeconomic conditions, governing their farming activities and learn how to collect,
retrieve, analyse and disseminate information. Hence, in this study education will expected to
have positively related with teff production efficiency

Experience of the household head: the effect of this variable is captured by the level of
years the household head spend in teff active farming, which may accumulate over time due
to learning by doing. The more experienced the farmer is the more efficient he/she might be.
Thus, positive coefficient is going to be expected.

Credit: The effect of this variable would be examined by binary variable; 1 if household had
access to credit during 2022/23 production year, and 0 otherwise. As availability of loans
reduces capital constraints and facilitates the timely application of inputs, it is expected to
positively influence technical efficiency. Hence, the sign of the coefficient of this variable in
the efficiency model will be expect to be positive.

Distance from farms: It is the distance of teff farms from household's residence measured
by kilo-meter. Those farms near to homestead will save travel time and then get more
management; whereas, those farms far away from household's residence will receive less
management and the frequency of visits may reduce. As a result, in this study distance of
residence from teff farms will expected to have negatively related with teff production
efficiency.

Household size: It is total numbers of family member who lives in one roof during the
2022/23 teff production season. Empirical studies showed that family size has positive and
significant effect on the efficiency level of the farmer. Thus, family size will expect to bring a
positive influence on technical efficiency of farmers in the study area.

Proximity to the market: This variable is measured by the distance between the most
nearest market and teff farm plot in kilo-meter. Farmers who are near to market center are
more technically efficient than farmers far away from the nearest market center and vice
versa.
Non-farm Income: It is continues variable which represent the total amount of income from
off/non-farm income during the production season. The amount of off/nonfarm income may
have a systematic effect on the technical efficiency of farmers. This is because farmer may
allocate more of his/her time to off /non-farm activities and thus may lag in agricultural
activities. Hence, in this study negative association between non-farm income and technical
efficiency will be expected.

Training: It is dummy variable having value equal to 1 if the household got training at least
one day in the cropping season and zero otherwise. Training is an important tool in building
the managerial capacity of the household head. Many empirical studies showed that training
found to be affect efficiency positively and in this study the expected coefficient of training is
positive.

Membership in local organization: This variable is captured by binary variable having the
value of 1 if the household head is participating in one of local organization found around
him/her. If the household head is a member of local organization, he/she can get labour
assistance in case where the farmer is in difficulty and financial assistance as well. Thus
positive coefficient is going to be expected.

Land fragmentation: It is the number of location under different plots which farmer
managed during the production year. If farm plots of the household are fragmented and
scattered over many places that will be difficult to perform farming activities on time and
effectively. Increased land fragmentation leads to inefficiency by creating shortage of family
labour, costing time and other resources that should have been available at the same time.
Hence, in this study negative association between land fragmentation and technical efficiency
will be expected.
CHAPTER FOUR: RESULTS AND DISCUSSION
The chapter has been divided into two main sections. The first section deals with the results
of descriptive analysis relating to socio-economics, demographic characteristics and various
agricultural activities undertaken by sample household heads. In the second section, the
econometric results related to level of technical efficiencies and factors affecting technical
efficiency in teff production have been presented and discussed.

4.1. Descriptive Results

The descriptive statistics presented this section is comprised of various sub section. The
discussion is included demographic and socio economic characteristics; institutional support;
rate of input use, crop yields and description of variables.

Tabel-4.1. summary of variables

Variable Obs Mean Std. Dev. Min Max

Sex 100 .96 .1969464 0 1

Age 100 38.4 12.74338 20 70

M status 100 1.92 .4187524 1 4

Edu level 100 2.01 .9044782 1 4

Hh size 100 3.98 1.825631 1 9

Experience 100 17.71 13.57009 2 56

Land size 100 .956 .4643492 .3 3.5

Oxen 100 2.09 .3785939 1 4

Off farm inc 100 11392 32942.69 0 240000

Fertilizer 100 323.52 173.8159 100 800

Credit 100 .68 .4688262 0 1

Training 100 .43 .4975699 0 1

LOmember 100 .77 .4229526 0 1

Mktproximity 100 .8715 .6961022 .2 4

Distancfland 100 1.7232 1.622645 .2 10

seed 100 15.66 10.79302 3 60

Fragmentation 100 3.22 1.314872 1 7

Labor 100 48.98 29.57237 12 200

Sex of the household head:

The survey result indicated that four percent of households are female-headed. It is
understood that female-headed households face greater challenges in the agricultural
production and marketing compared with their male-headed counterparts. This is due to the
fact that female household heads in the rural areas in Ethiopia hold various tasks including
collecting of fire wood from the field, fetching water, childrearing and household
management obligations. In addition, they have farm management tasks that increase the
women burden. Such multiple tasks combined with less resource accesses and ownership lead
to more frequent and perhaps severe economic and social shocks particularly poverty and
food insecurity.

Marital status of the household head:

Marital status of the household head with respect to teff producer was surveyed. Among the
given sample households, 12% households were single. But, 85% households were married.
The rest divorced and widowed household heads covered 2% and 1% respectively. Females
are head of households, when they were divorced or widowed, take responsibility and starting
farming in addition to homemaking role.

Table 4.2. Distribution of sample households by their marital status

Marital Status Number Percent

Single 12 12

Married 85 85

Divorced 2 2

Widowed 1 1

Total 100 100

Labor:
Family labor was the main source of labor for performing various farming activities for
smallholder farmers. In the study area, it has been observed that there was a sort of labor
division in various farm works between family members. Ploughing and planting were types
of activities belonging to male whereas food preparation and childcare were left to female. In
most of other cases than these both female and male worked together. Moreover children
participated in different farm and non-farm activities. In this specific study, labor availability
of the sample household was calculated by summing up total family labor and total amount of
labors which are hired. From total household labor supply for teff production the average
labor demanded by each households of teff producer from family and hired labourer was
estimated to be 48.98 laborers (Table 4.1).

Farm size:

An attempt was made to study the size of cultivated land holding by sample household heads
of Enemay Woreda. To mitigate the challenge of land shortage, young farmers usually shared
land with their parents and relatives during marriage or obtained land use access through
sharecropping and renting in land. The survey result indicates that 3% of the sample
household had less than 0.5 hectare and 2% of household had more than 2 hectare of
cultivated area. The analysis and pattern of cultivated land amongst sample households
indicated that the average size of farm owned by the sample household heads were .956
ha (table 4.1). There were some variations in the distribution of the land holding among
sample households.

Oxen:

Oxen were the only sources of traction power in the area. Shortage of draught power limits
the area that can be cultivated. Shortage of oxen power leads to poor land preparation and
delayed completion of the operation. Poor land preparation leads to poor plant establishment,
heavy weed infestation and low yields. The number of draught animals determines the
amount of land that can be cropped, the types of crop grown, total crop production and yield
(Mburu et al., 2014). Larger holding of oxen permit a greater area of land to be cultivated
(Ogada et al., 2014). Oxen power was found as an important factor of production in the study
area. Oxen power utilization by sample households was an average oxen power used by the
sample households in teff production was 2.09 oxen per day with standard deviation
of .3785939 (Table 4.1).Almost in all sample kebeles, farmers on average ploughed their land
three to six times for production of teff. Usually the land preparation started from the first
commencement of rain and they continued ploughing each month until sowing of the crop. It
was also observed that the sample farmers in the study area gave more emphasis to ploughing
which is the major challenge for improving productivity. Given the above fact, almost all of
the respondents were used two oxen per day. Given the above fact, 2% of the sample
respondent had single oxen while 89% of them owned one pair of oxen. On the other hand,
only 9% of the sample farmers owned more than two pair of oxen

Off/non-farm activities:

24 Farmers in the study area are engaged in various off/non-farm activities in parallel with
the main farming activities during the farming season. Some of these activities are; grinding
mills, handicraft, and selling of local drinks. The income they desperately need to obtain from
such off/non-farm activities may proofs that there is low income that can be usually obtained
from farming activities. In this study, the average amount of off/nonfarm income was birr
11392 per year with standard deviation of 32942.69 (Table 4.1).

Credit:

There exist both formal and informal lending institutions to provide credit. The formal
sources of credit in the study area are Amhara Credit and Saving Institution (TSEDEY
BANK) and local cooperatives, whereas friends, relatives, traders, and the like are informal
sources from which farmers could get credit. As far as the access to credit is concerned, on
average 68 households from our respondents were got credit access either source when they
are in need of it provided that they full fill the requirements set by the lending institutions
(formal or informal) with standard deviation of .4688262 (table 4.1). Nevertheless, the
requirements and procedure to use credit from the formal institutions were not as easy as the
local co-operatives and informal institutions. For instance, the farmers were asked to form a
group of ten to acquire credit. If any one of the group members was unable to pay back the
amount he/she acquired, the remaining group members would be obliged to repay the total
amount. Most of the time farmers face food shortage before the next new harvesting season.
As a result a lot of the credit user farmers reported that they used the money to purchase food
grains and medicines. On the other hand, credit users also reported that they used the credit to
finance school expenses whereas some of them used it to purchase farm inputs. Even if the
constitution and other land laws prohibit to sale as well as use land as collateral, it is reported
that land was asked as collateral by credit institutions (formal as well as informal). Livestock
and other physical properties and crops were also used as collateral by most of the informal
lenders. Because of our result shows that credit has negative effect for the productivity of teff
producer farmers in the study area.
 4.2. Econometrics Results

Table 4.3 Tobit regression

Tobit regression Number of obs = 100

Limits: lower = -inf Uncensored = 98

upper = labor Left-censored = 0

Right-censored = 2

Wald chi2(18) = 495.76

Log likelihood = -261.8360 Prob > chi2 = 0.0000

Output Coef. Std. Err. z P>|z| [90% Conf. Interval]

Sex 7.730078*** 2.208679 3.50 0.000 4.097124 11.36303

Age .0499026 .66973 0.75 0.456 -.0602581 .1600633

Mstatus 2.47421** 1.020565 2.42 0.015 .7955301 4.15259

Edulevel -.4189112 .4691519 -.89 0.372 -1.190597 .352771

Hhsize -.2955349 .2769028 -1.07 0.286 -.750994 .1599297

Exper -.0322841 .0636716 -0.51 0.612 -.1370195 .0724513

Lsize 4.736669*** 1.175323 4.03 0.000 2.803434 6.669904

Oxen -1.895607* 1.044367 -1.82 0.070 -3.613437 -.177763

Offfarm .000209* .000012 1.74 0.081 1.8e06 .0000406

Fertilizr .0168225*** .0033894 4.96 0.000 .0112474 .223975

Credit -3.2879*** .8539416 -3.85 0.000 -4.692508 -1.883291

Training 1.241882 .7714401 1.61 0.107 -.0270241 2.510788

LOmebr -2.064915** .9520058 -2.17 0.030 -3.630825 -.4990052

Mktprx .5342766 .7344056 .73 0.467 -6.737131 1.7422266

Ldistanc -.4756169 .3163609 -1.50 0.133 -.9959843 .0447504

Seed -.230048 .0430573 -0.53 0.593 -.0938277 .0478181

Fragme -.3725155 .3698946 -1.01 0.314 -.9809379 .235907

Labor .1400192*** .0215084 6.51 0.000 .1046411 .1753973

Cons -6.977092 4.296216 -1.62 0.104 -14.0374 .089555

Var(output) 11.68821 1.676229 9.232127 14.79771

***1%^ level of significance, **5% level of significance and *10% level of

significance: own computation,(2023)

The above results of the Tobit model can be interpreted as follows:

Sex: Holding all other variables constant, females have 7.73 units higher output than males,
on average (p < 0.001).

Age: Holding all other variables constant, age is not a significant predictor of output (p =
0.456).

Marital status: Holding all other variables constant, married individuals have 2.47 units
higher output than unmarried individuals, on average (p = 0.015).

Education Level: Holding all other variables constant, education level is not a significant
predictor of output (p = 0.372).

Household size: Holding all other variables constant, household size is not a significant
predictor of output (p = 0.286).

Experience: Holding all other variables constant, years of experience is not a significant
predictor of output (p = 0.612).

Land Size: Holding all other variables constant, individuals with larger land sizes have 4.74
units higher output than those with smaller land sizes, on average (p < 0.001).

Oxen: Holding all other variables constant, owning oxen is a significant predictor of output (p
= 0.07) with 10% level of significance

Non-farm income: Holding all other variables constant, non-farm income is marginally
associated with higher output (p = 0.081).

Fertilizer: Holding all other variables constant, using fertilizer is associated with 0.02 units
higher output, on average (p < 0.001).

Credit: Holding all other variables constant, not having access to credit is associated with
3.29 units lower output than those who have access to credit, on average (p < 0.001).

Training: Holding all other variables constant, training is marginally associated with higher
output (p = 0.107).
Local organization membership: Holding all other variables constant, membership in a
farmers' organization is associated with 2.06 units lower output than those who are not
members, on average (p = 0.03).

Market Proximity: Holding all other variables constant, proximity to markets is not a
significant predictor of output (p = 0.467).

Distance from land: Holding all other variables constant, distance to the nearest large market
is not a significant predictor of output (p = 0.133).

Seed: Holding all other variables constant, the amount of seed is not a significant predictor of
output (p = 0.593).

Land fragmentation: Holding all other variables constant, fragmentation of land ownership is
marginally associated with lower output (p = 0.314).

Labor: Holding all other variables constant, 1 unit increase in labor is associated with 0.14
units higher output, on average (p < 0.001).

The variance of the error term (e.output) is 11.688 and the 90% confidence interval for the
coefficients is also provided.
CHAPTER FIVE: DISSCUSSION AND RECOMMENDATION
5.1 conclusion
The main objective of this study is examine technical efficancy of teff producers in Amhara
region and identifying the determnantes of techncal efficancy. Stochastic frontier production
function was applied to achive the studys objective. In this study, export panel data of 2196
parcel and 1342 households for the years 2013-14 and 2015-16. which has censored data
structure have been analyzed with Tobit model The result of the study revealed that all
variables except improved seed were found to be postivily and significant (at 1 percent
significance level). Moreover, the model output depicted that the mean level of TE for Teff
was found to be 58% in 2013-14 and 54% 2015-16. This implies that the technical efficiency
of teff decline through time. The result of MLE sows that number of fields, family size,
frequent extension visits and leptosol negatively and significantly affect technical efficiency
of teff negatively. While, the number of TLU, the interaction of family size and the number
of fields and vertisol positively and significantly affect technical efficiency of teff.

5.2. Policy Recommendation

Based on the above results, the following important recommendations were given: The
positive and statistical significance of major inputs such as fertilizer (DAP and Urea), seed,
labor and oxen-days show the importance of conventional inputs in smallholder farmers
implying better access and use of these inputs could lead to higher teff production in the
study area. Thus, the government should work on supply and distrbution of agricultral input.
The result of the Study indicates that number of fileds and techinical efficiency has negative
and significant relation. However, when number of filed intracte family size it has positive
and significant relation with technical efficency. This implied the existance of shortage of
labour during peak production season and it has negative effect on technical efficiency. Thus,
to solve this problem reaserch center and government should introduce labour saving
technology. The number of livestock increase technical efficiency. Hence, there is a need to
design appropriate policies and strategies for improving livestock production systems by
solving the shortage of feed and providing various technical and advisory support services,
which in turn would enhance the efficiency of teff production in the study area as the whole.

Having a large family size has a negative effect on technical efficiency. Hence, policies and
strategies should be designed to expand and promote small enterprises and microenterprises
in the country that can absorb excess labor fro size on agricultural production eff i erm. m
rural areas to reduce the negative effect of large family ciency. Furthermore, education on
family planning should be strengthened by the government to reduce population pressures on
scarce land resources in the long t extension services in the study area have not been
effective. This calls for the need for more effective policy support for extension services.
Additional efforts need to be devoted to upgrade the skills and knowl edge of the extension
agents as technological inputs and practices. In general well as ensuring timely dissemination
of modern the existence of higher technical inefficiency in the study area indicated room to
increase the level of technical efficiency of teff in the other concerned organs should work on
enhancing teff there exists a study area . Thus the government and production by undertaking
approprate action to inhance farmers technical efficiency.

5.1. Conclusion

The main objective of this study is examine technical efficancy of teff producers in Amhara
region and identifying the determnantes of techncal efficancy. Stochastic frontier production
function was applied to achive the studys objective. In this study, export panel data of 2196
parcel and 1342 households for the years 2013-14 and 2015-16. which has censored data
structure have been analyzed with Tobit model The result of the study revealed that all
variables except improved seed were found to be postivily and significant (at 1 percent
significance level). Moreover, the model output depicted that the mean level of TE for Teff
was found to be 58% in 2013-14 and 54% 2015-16. This implies that the technical efficiency
of teff decline through time. The result of MLE sows that number of fields, family size,
frequent extension visits and leptosol negatively and significantly affect technical efficiency
of teff negatively. While, the number of TLU, the interaction of family size and the number
of fields and vertisol positively and significantly affect technical efficiency of teff.

5.2. Policy Recommendation

Based on the above results, the following important recommendations were given: The
positive and statistical significance of major inputs such as fertilizer (DAP and Urea), seed,
labor and oxen-days show the importance of conventional inputs in smallholder farmers
implying better access and use of these inputs could lead to higher teff production in the
study area. Thus, the government should work on supply and distrbution of agricultral input.
The result of the Study indicates that number of fileds and techinical efficiency has nega

The result of the Study indicates that number of fileds and techinical efficiency has negative
and significant relation. However, when number of filed intracte family size it has positive
and significant relation with technical efficency. This implied the existance of shortage of
labour during peak production season and it has negative effect on technical efficiency. Thus,
to solve this problem reaserch center and government should introduce labour saving
technology. The number of livestock increase technical efficiency. Hence, there is a need to
design appropriate policies and strategies for improving livestock production systems by
solving the shortage of feed and providing various technical and advisory support services,
which in turn would enhance the efficiency of teff production in the study area as the whole.
Having a large family size has a negative effect on technical efficiency. Hence, policies and
strategies should be designed to expand and promote small enterprises and microenterprises
in the country that can absorb excess labor fro size on agricultural production eff i erm. m
rural areas to reduce the negative effect of large family ciency. Furthermore, education on
family planning should be strengthened by the government to reduce population pressures on
scarce land resources in the long t extension services in the study area have not been
effective. This calls for the need for more effective policy support for extension services.
Additional efforts need to be devoted to upgrade the skills and knowl edge of the extension
agents as technological inputs and practices. In general well as ensuring timely dissemination
of modern the existence of higher technical inefficiency in the study area indicated room to
increase the level of technical efficiency of teff in the other concerned organs should work on
enhancing teff there exists a study area . Thus the government and production by undertaking
approprate action to inhance farmers technical efficiency.

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