Technical Efficiency of Teff Farms Controlling for Neighborhood effects in Ethiopia

Abstract Teff can be called the lifeblood of the majority of Ethiopians. However, Teff production is constrained by farmers’ own and neighbor farmers’ socioeconomic, demographic, intuitional, and farm characteristics that decrease Teff productivity. To fill this gap, a combination of modern technologies with a better level of farm efficiency becomes indispensable. Hence, this study aims to examine the technical efficiency of Teff farms controlling for neighborhood effects in Ethiopia using 858 Teff farmers. The stochastic frontier translog production and Spatial Lagged Explanatory (SLX) models are estimated using two waves of panel data from the Ethiopian socioeconomic survey. The unobserved heterogeneity has been controlled for by a correlated random effect estimation. The results show that the average technical efficiency of Teff farm is 78.5%, indicating that farmers have about 21.5% likelihood for improving their Teff farm efficiency, averagely. Besides, the estimated correlated random effect of the spatial lagged explanatory model indicates that gender, age, education, family size, community participation, planting method, average neighbors' community participation, average neighbors' planting method, average neighbors' mineral fertilizer application, and average neighbors' use of improved seed were found to significantly affect the level of technical efficiency of Teff farms in the study area. Moreover, we show that controlling for the neighborhood effects in the estimation of technical efficiency of Teff production statistically and significantly changes the inferences. Therefore, neighborhood effects can be the best alternative platform for farm knowledge transmission and use as a development actor if properly managed and organized.