Abstract:
The objective of study was to estimate the marginal effects of inputs on the red pepper production risk and technical efficiency levels of farmers. The study employed the stochastic frontier model with flexible risk properties that able to consider both production risk and technical inefficiency effects. The study also used Cobb-Douglas production function and a cross-sectional data that was collected from 320 sample red pepper farmers in the study area. A one-step maximum likelihood method was used to estimate the mean output, production risk and technical inefficiency models simultaneously. The study result justifies, the presence of both technical inefficiency and production risk effect in red pepper production in the study area. The input variables like fertilizer, seed, amount of agrochemicals and labor positively affect red pepper output. The study also presented that the red pepper production technologies exhibit increasing returns to scale in the study area. Fertilizer, seed, agrochemicals reduce output risk whilst labor increase output risk but its effect was insignificant.
The findings of the study demonstrate that there were efficiency differentials among red pepper farmers in the study area. It also indicates the presence of a significant difference between estimation of production risk-adjusted and not adjusted technical efficiencies. The average technical efficiency of red pepper farmers is 46.5 per cent and 62.5 per cent for production risk-adjusted and not adjusted technical efficiencies respectively. The market information, row planting, and gender being male head household positively related to technical efficiency. The age of household head, the prevalence of diseases, family size and education at college and above level negatively related to technical efficiency. This study recommends that inputs for red pepper production should be made readily available, affordable and accessible to farmers so that more may be employed to further increase output.
