Analysis of Factors Affecting the Technical Efficiency of Coffee Producers in Jimma Zone : A Stochastic Frontier Analysis

Ethiopian coffee production and its productivity level are unsatisfactory to uphold the country’s comparative advantage. The study intends to examine possible reasons for low productive performance of coffee using cross sectional data gathered from Jimma zone. An attempt to measure technical efficiency of coffee producers, analysis of its determinants and the impact of various distributional assumptions on technical efficiency estimates is made. Accordingly, both error component model and technical inefficiency effects model have been estimated in one step approach after data have been transformed. Maximum likelihood estimate of technical efficiency was obtained from truncated normal model which was supposed to describe the data adequately. The result revealed that various distributional assumptions of technical inefficiency have approximately similar impact of on TE estimates. On average, coffee producers are 72% efficient, implying that there is ample opportunity for these farmers to raise output level at present technology. There is also advantage of scale economies linked to increasing returns to boost output. Except fertilizer, overutilization of other inputs leads to inefficiency. Technical inefficiency effects are modeled as a function of farmer specific socio-economic factors. Education, distance, family pressure and poor soil fertility tends to increase technical inefficiency of farmers whereas off farm income, proximity to market, cereal crop production, sex and good soil fertility improves their technical efficiency. Farmers can still produce higher output under available technology, indeed. Therefore, government should target at development of rural infrastructure, work diversification, rural employment creation, promotion of rural female management through awareness creation and soil conservation to overturn output loss by technical inefficiency of coffee producers in Jimma zone