TECHNICAL EFFICIENCY UNDER PRODUCER’S INDIVIDUAL TECHNOLOGY: A METAFRONTIER ANALYSIS

Differences in resource endowment between regions influence the technologies applied in agriculture and cause location-specific effects on production and technical change. Access to technologies may also differ within regions because producers may apply different technologies in production due to different characteristics. Within this setting, we extend the existing literature by considering that producers face region- and farm-specific production frontiers. The treatment of essentially heterogeneous technical efficiency (TE) is performed following a two-step procedure. First, a random coefficient specification of the production technology is used to measure the interactions of technology adoption with time, input factors and output. Second, linear programming techniques are employed to envelop the optimal level of technology. This procedure is applied to household-level data from eastern, central and western provinces in China. Our results provide evidence that technical efficiency is significantly affected by farm heterogeneity. This factor influences TE directly as a producer-specific input, and indirectly through interaction with observable inputs such as land, labor, capital and intermediate inputs. Our results also prove the assumption that farming technology exhibits region-specific characteristics. Furthermore, there is a disparity of TE across provinces that narrows over the study period and is driven by the shifts of production to the metafrontier.