The effect of management on technical inefficiency among wheat producers in the Alqassim region in Saudi Arabia: A stochastic production frontier analysis

The Saudi Arabian wheat industry has witnessed a structural change in the last 15 years. Elements of structural change lie mainly in the introduction of large size commercial farms and the adoption of a wide array of new technologies. This structural change has dramatically increased the complexity of farm management in the Kingdom and suggests the possibility of the existence of substantial inefficiencies in wheat production. It is the objective of this dissertation to first, measure the technical efficiency of a sample of 154 wheat farmers in the Alqassim region in northern Saudi Arabia using the stochastic frontier production function approach developed by Aigner, et al. (1977) as well as the Jandrow\u27s (1982) formula that allows the isolation of inefficiency and random error effect. The second objective of this study was to identify factors that are likely to be the sources of variation in technical inefficiency among sample farmers. These factors were divided into two groups. In the first group were management practice variables such as farm size, time of plantation, seed chemical treatment, amount of seed, amount of fertilizer, soil analysis, irrigation practice, degree of specialization, and amount of debris. The second group was management quality variables such as education, experience, and contact with agricultural extension service. A linear function, using technical inefficiency as the dependent variable, was estimated by the stepwise regression technique. This study, unlike other technical efficiency studies, has allowed the interaction between management practice variables and management quality variables to directly affect the technical inefficiency or the dependent variable. Results of this research indicated that a significant level of technical inefficiency exists among wheat producers in the Alqassim area. The mean level of technical inefficiency for the 154 farms was found to be 0.27. The empirical results also showed a strong evidence of a positive relationship between technical inefficiency and farm size. Finally, the factors most significant in explaining variation in technical inefficiency were found to be farm size, experience, analyzing farm soil, and contact with the agricultural extension service