ECONOMIC EFFICIENCY OF GROUNDNUT (Arachis hypogaea L.) PRODUCTION: THE CASE OF GURSUM DISTRICT, EAST HARARGHE ZONE, OROMIA NATIONAL REGIONAL STATE, ETHIOPIA

Abstract

The purpose of this study was to analyze the economic efficiency of groundnut production in Gursum District of East Hararghe Zone, Oromia National Regional State, Ethiopia. This study used cross-sectional data collected in 2014/15 production season from a sample of 123 farm households selected through two stage random sampling techniques. Descriptive statistics and econometric models were used to analyze the data. Technical, allocative and economic efficiencies were estimated using parametric approach employing stochastic frontier Cobb-Douglas production function, while factors affecting efficiencies of production were modelled using Tobit model. The mean technical, allocative and economic efficiency scores were found to be 87.8%, 68.5% and 60% respectively, indicating the existence of substantial inefficiencies in groundnut production. The results of the Tobit model revealed that age, family size, livestock ownership, extension contact, credit access were found significantly and positively affecting both allocative and economic efficiencies while proximity to homestead had negatively affect. It also revealed that sex, education, family size and experience of groundnut farming were found to have significant and positive effect on technical efficiency while credit access had negatively affect. Besides, experience of groundnut farming were found to have negatively and significantly affect allocative efficiency. The result indicated that there is a room to increase the efficiency groundnut producers in the study area. Hence, emphasis should be given to improve the efficiency level of those less efficient farmers. Beside this, policies and strategies of the government should give due emphasis for the above mentioned determinants.