Efficiency Analysis of Cotton-Wheat and Rice-Wheat Systems in Punjab, Pakistan

The main objectives of this study were to estimate the technical, allocative and economicefficiency and subsequently to investigate the determinants of technical, allocative andeconomic inefficiency of cotton-wheat and rice-wheat farming systems in Punjab, Pakistan. Data were collected from 400 farmers (200 farmers from each farming system) for the crop year 2005-06. Technical, allocative and economic efficiency scores wereestimated by a non-parametric data envelopment analysis procedure. Technical, allocative and economic inefficiency scores were separately regressed on socio-economic and farm specific variables to identify the sources of technical, allocative and economic inefficiency using a Tobit regression model. The mean technical, allocative and economic efficiency calculated for the cottonwheat system was 0.75, 0.44 and 0.37, respectively. Results of the study revealed that if sample farms in cotton-wheat system operated at full efficiency level they could reduce their input use by 25 percent and cost of production by 56 percent without reducing the level of output and with the same technology. Decomposition of technical efficiency into pure and scale efficiency revealed that small farms were pure technically more efficient than large and medium farms. Scale inefficiency was found to account for a larger share of technical inefficiency on small farms than on medium and large farms. Small farms were found to be less allocatively efficient than medium and large farms. The mean technical, allocative and economic efficiency of the sample farms in rice-wheat system was estimated at 0.70, 0.48 and 0.40, respectively. These results implied that if sample farms in rice-wheat system operated at full efficiency levels they could reduce their input use by 30 percent and cost of production by 52 percent without any reduction in the level of output and with the existing technology. Decomposition of technical efficiency into pure and scale efficiency revealed that small farms were pure technically more efficient than large and medium farms. Pure technical efficiency of small, medium and large farms was 087, 0.79 and 0.81, respectively. Scale efficiency of small, medium and large farms was 079, 0.94 and 0.94, respectively. Small farms were found to be less allocatively efficient than medium and large farms. 2 Results of Tobit regression models showed that years of schooling and number of contacts with extension agents had negative impact on technical, allocative and economic inefficiency of both farming systems. Access to credit had negative impact on technical inefficiency of sample farms in cotton-wheat system. Impact of access to credit was negative on technical, allocative and economic inefficiency of rice-wheat system. It was found than those farms which were located close to the market were technically less inefficient than the farms located away from the markets. Sharecroppers were technically more inefficient than owner operators in both farming systems of Punjab