An Estimation of Technical Efficiency of Tea Smallholdings in Ratnapura District of Sri Lanka

Abstract

While accepting the fact that the tea smallholdings sector of Sri Lanka immensely contribute to the annual tea output of the economy, the sector still faces various deficiencies due to problems pertaining to input related issues. Measuring the level of efficiency and identifying the factors which are attributed to inefficiency are in utmost importance in introducing remedies for that. A cross sectional survey was conducted on a sample of tea smallholders in Ratnapura district where highest contribution to the total tea production of the country is made. In this study, the Cobb-Douglas Stochastic production frontier model was used by incorporating the technical inefficiency effect model to estimate the level of technical efficiency in tea smallholdings sector. The study revealed that average technical efficiency of tea smallholdings sector in the study area was 87.36 percent that keeps a margin of 12.64 percent for further improvements through better use of available resources and technology. The results of the Cobb-Douglas model revealed that the estimated coefficients of land, labor and fertilizer are positively and significantly affect the green leaves production of the sector. The findings of the inefficiency model disclosed that age, farming experience, level of education, occupation, age of tea plants, farming group membership and credit access have significant negative impact on technical inefficiency