ANALYSIS OF TECHNICAL EFFICIENCY OF SUGARCANE PRODUCTION IN ETHIOPIA: THE CASE OF WONJI/SHOA SUGAR CANE ESTATE FARM

Abstract

Ethiopian sugar cane production is unsatisfactory to uphold the country‟s comparative advantage.Thus, this study was conducted to examine possible reasons for low productive performance of sugar cane production by using cross sectional data gathered from Wonji/Shoa Estate Farm and analyzing its technical efficiency. Accordingly, both error component model and technical inefficiency effects model have been estimated in one step approach after data have been transformed to log. Maximum likelihood estimate of technical efficiency was obtained from half normal model which was supposed to describe the data adequately. Technical inefficiency effects are modeled as a function of area, cane age, cane variety, cane type (ratoon) and soil type. The result revealed that various distributional assumptions of technical inefficiency have approximately similar impact of on technical efficiency estimates. On average, sugar cane production in each plot are 77% efficient, implying that there is ample opportunity for the estate plot to raise output level at present technology.