Determinants of Technical Efficiency in Agriculture and Cattle Ranching : A Spatial Analysis for the Brazilian Amazon

The determinants of technical efficiency in agriculture and cattle ranching are closely related with the debate involving the conservation-development trade-off in the Brazilian Amazon. Concerned with balancing development and environmental conservation, policy makers and academics have emphasized the importance of choosing ways of selecting areas where land use restrictions would be established. In order to understand the relationship between spatial patterns of deforestation and the associated distribution and characteristics of economic activity, issues regarding technical efficiency are clearly important. This paper aims to identify the socio-economic and environmental determinants of technical efficiency in agriculture and cattle ranching in the Brazilian Amazon emphasizing their relationship with spatial processes of deforestation and development. The study is structured in two parts. The first part is concerned with measuring technical efficiency for agriculture and cattle ranching in each geographical unit focusing on the production relationship between inputs and outputs. The second one focuses on the variation in the efficiency measure explained by exogenous factors and includes the spatial analysis. We adopt the model proposed by Battese and Coelli (1995) where the production function and the exogenous effects influencing technical efficiency are estimated simultaneously