INCOME DIVERSIFICATION AND ITS IMPACT ON TECHNICAL EFFICIENCY OF SMALLHOLDER MAIZE PRODUCERS IN ARBAMINCH ZURIA WOREDA OF SOUTHERN ETHIOPIA

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.