Decomposition of Economic Efficiency under Risk into Technical and Allocative Risks: A Study on Fish Production in South Tripura District, Tripura, India

The risk arises from inadequate knowledge about best practice techniques(technical risk) and markets/prices (allocative risk). On the basis of thisassumption, the economic inefficiency has been decomposed intoinefficiencies due to technical and allocative risks. The study, conductedduring 2004-05, is based on the primary cross-sectional data collectedfrom six villages from three rural development blocks of South Tripuradistrict in the Tripura state of India, with 239 farms as the sample. Morethan 96 per cent of the difference between observed and frontier outputhas been found primarily due to factors which are under the control offarms, i.e. due to technical inefficiencies. The mean economic efficiencyunder risk has been estimated at the level of 34.11 per cent. The economicinefficiency due to technical risk and allocative risk has been found as20.86 and 45.03 per cent, respectively of the existing economic inefficiency.The variations in EEar (allocative risks) have been found lower than thosein EEtr (technical risks). A negative correlation has been observed betweenEEtr and EEar. The amount of EEtr has been found to be lower than that ofEEar.