An analysis of technical efficiency of rice production in Indonesia

The objectives of this paper are to estimate technical efficiency in rice production and to assess the effect of farm-specific socio-economic factors on the technical efficiency using survey data from 15 provinces in Indonesia, collected in 2008. A stochastic frontier production function model is used to estimate the technical efficiency of rice farms in each province, and using the model, the influence of socio-economic factors on efficiency is also measured. This study finds that there is a sizeable degree of variation of inefficiency between the 15 provinces. It also finds that factors like land size, income and source of funding are influential determinants of technical efficiency. In terms of age, it also found that younger farmers tend to be more efficient. Expanding the agricultural area, especially outside Java and Sumatera Islands, improving farmers’ income and giving an incentive to young people to work in the agricultural sector will enhance technical efficiency and thus productivity, as well as the overall rice output.