Abstract:
The agriculture sector is the mainstay of Ethiopian economy. Despite its importance, the
sector is dominated by subsistence-based farming systems run by smallholder farmers who
often tend to participate in income diversification activities. The objective of this study was to
analyze income diversification and its impact on technical efficiency of smallholder maize
producers in Arbaminch Zuria Woreda of Southern Ethiopia. The study was based on crosssectional
survey data collected from 390 smallholder farmers. A combination of probability
and non-probability sampling technique was employed to select the respondents. Stochastic
frontier model was used to estimate the technical efficiency score and to identify the
determinants of technical efficiency and a binary endogenous switching regression model
was applied to measure the impact of income diversification on technical efficiency of
smallholder maize producers. The stochastic frontier model results revealed that age of
household head, educational status, credit access, frequency of extension visits, and the use
of improved seed were significantly and positively affected technical efficiency of
smallholder maize producers in the study area. The binary endogenous switching regression
model results showed that farm households who participated in income diversification
activities were less technically efficient in maize production compared with their nonparticipant
counterparts. In the meantime, the study is concluded that participation in
income diversification activities did not promote technical efficiency in maize production
even though it is important for other reasons such as to generate additional income. Based
on these findings, it is recommended to improve the efficiency level of smallholder maize
producers by providing a timely supply of inputs such as improved seed and fertilizer,
efficient extension services, affordable credit service, and demonstrative vocational
education and training to enhance the efficiency of smallholder farmers in maize production.
