Analyzing Extents and Determinants of Economic Efficiency of Farm Households in Metekel Zone, Western Ethiopia: Data Envelopment Approach

The study investigated extents and major determinants of economic efficiency of farmers in Metekel zone, western Ethiopia using 2016 rural survey. Multi-stage random technique was used to collect data of 420 farmers. Based on the results of data envelopment approach, the average technical efficiency score of farmers was found as 0.738 and hence they forgone a total income of 7,212.79 Birr. The mean allocative efficiency score was found as 0.350 and hence there is a considerable room to reduce their allocative errors. The mean economic efficiency score was found as 0.256 and hence they can reduce their observed costs by 74.4 percent through reducing their cost inefficiency. The results of Tobit model revealed that family size (+), farm size square (-), livestock size (+), land fragmentation (-), crop diversification (+) and sharecropping (-) were found to have significant effect on economic efficiency of farmers. Therefore, the study forwarded policy suggestions for the concerned bodies to: make further efforts in strengthen mixed crop-livestock farming system with better market infrastructures; train farmers to diversify their crop for risk minimization and market surplus; strengthen tenancy security for sharecroppers; consolidate fragmented plots; give top priority in expanding health services; formulate appropriate strategies for expanding rural farm credit facility; expand off/non-farm job opportunities; and provide an appropriate extension services and agricultural information. Keywords: DEA, Economic Efficiency, Farm Households, Tobit Model, Metekel zone, Western Ethiopia DOI: 10.7176/JESD/10-11-04 Publication date:June 30th 201