Rural institutions and the technical efficiency of teff production in Ethiopia

Abstract

We examine the effect of rural institutions on plot-level technical efficiency of teff production. We account for differences in production technology, access to the market, plot characteristics, and weather shocks across plots and investigate the robustness of the effects of rural institutions on technical efficiency across various specifications. Using a large and detailed cross-section of teff plots, we find that teff output could be increased by approximately 25 percent with the available inputs and technology through improved technical efficiency. The magnitude of technical inefficiency is robust to alternative functional forms and variable specifications. Community discussion groups and distance to the nearest agricultural co-operative have a positive relationship with technical efficiency, highlighting their potential to enhance agricultural productivity. However, we find limited evidence on the relationship between co-operative membership, visits with extension and technical efficiency of teff producers. Our results show that when studying the impact of new programs and policies in agriculture, it is important to look beyond just whether farmers are members of co-operatives. We might consider other factors, such as how much access they have to co-operative services. It is crucial for policymakers to consider implementing targeted interventions to share information on best management practices and agricultural technologies in order to address the efficiency gap in teff production.