AN ANALYSIS OF THE TECHNICAL AND ALLOCATIVE EFFICIENCY OF PADDY FARMING: THE CASE OF MAHAWELI SYSTEM H1

Abstract

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This study estimates the technical and allocative efficiency o f paddy farming in Sri Lanka. Household-specific technical efficiencies were computed using cross-sectional data collected from the household survey conducted in 2014 using a Stochastic Frontier approach. The Cobb-Douglas functional form was adopted for the frontier production function and the distributional assumption made for the inefficiency term was half normal. The results o f this study show that the estimated mean technical efficiency of the farmers is 78.32 percent, suggesting there is a scope o f 21.68 percent to increase paddy productivity using present technology. The estimated Returns to Scale is 0.2806, which implies that a proportional increase in all factors o f production leads to a less than proportional increase in paddy productivity. Age, schooling, alcohol consumption, agricultural training, farmers' attitudes, and the distance between the land and the main watercourse are significant determinants o f technical efficiency. According to the analysis o f allocative efficiency, there exists inefficiency in allocating resources, where land and machinery resources are underutilised while labour is over utilised.