Determinants of Technical Efficiency of Smallholders Dairy Farmers in Njombe District, Tanzania

This paper is based on a study conducted in nine dairy cattle keeping villages of Njombe district in Tanzania with the overall objective of estimating Technical Efficiency (TE) and analyzing factors influencing Technical Inefficiency (TI) of smallholder dairy farmers. Cobb-Douglas stochastic frontier production function in which the parameters for the production frontier and for the inefficiency model were estimated jointly using the maximum likelihood technique on cross section data of 81 smallholder dairy farmers. Findings reveal that majority of respondents(61.7%) had TE below 50%. The implication of these findings is that majority of the respondents were technically inefficient and that the value of dairy production could be increased by 54.54% through better allocation and use of available resources. The inefficiency model showed that age, gender, education level, experience of the farmer and selling to processor are major factors having a significant and positive influence on the farmers’ technical inefficiency while marital status and use of hired labor are the major factors having a significant and negative influence on the farmers’ technical inefficiency.Key words: Technical efficiency; Technical inefficiency; stochastic frontier production function; maximum likelihood estimates; Returns to scal