RELATIVE ECONOMIC EFFICIENCY OF FARMS IN RICE PRODUCTION: A PROFIT FUNCTION APPROACH IN NORTH CENTRAL NIGERIA

Abstract

The study examines the relative economic efficiency of small and large rice farms in central, Nigeria. Previous studies of such were based on production functions which have been criticized due to the associated simultaneous equation bias because the input levels are endogenous. However, the profit function approach avoids these problems. Data related to input and output prices, production factors and socio-economic characteristics were collected from 143 rice farmers in Niger state, Nigeria. Analytical tools included descriptive statistics and seemingly unrelated regression (SURE). A striking result is that no female was found among the large farmers. Coefficient of seed, fertilizer, capital and sex of respondent which were not significant in OLS, were found significant in the profit function. The use of modern rice varieties significantly increases profits. Significant difference in economic efficiency between small and large farms was also discovered. To improve technical efficiency of rice farms, an accelerated program to provide modern rice varieties, fertilizer and land availability is needed. This paper provides empirical support to eliminate bias distribution of production inputs to large rice farms.