Estimation Of Technical Efficiency On Wheat Farms In Northern India – A Panel Data Analysis

In this paper an attempt has been made to estimate farm level technical inefficiency on wheat farms in Haryana State, India. This paper applies stochastic frontier production function for wheat farmers using unbalanced panel data for three years from 1996-97 to 1998-99. The farm level panel data was collected from 200 farmers spread over in each year forming 592 total observations. The frontier function involves inputs such as human labour, fertilizers, irrigation expenditure, seeds, land area and capital expenditure. All the estimates have expected signs. The results showed that the null hypothesis of absence of technical inefficiency effects was rejected indicating that the traditional average response function was not an adequate representation of the data given the specification of stochastic frontier model. The farm specific technical efficiencies estimated were observed to be time varying. The technical efficiency showed wide variation across sample farms ranging from 0.4346 to 0.9598 in the 3rd year of the study period. The mean technical efficiency was found to deteriorate through the years in wheat production. It declined from 0.9172 in 1st year to 0.9025 in 3rd year. The mean technical efficiency indicates that the realized output could be increased by about 10 percent without any additional resources. More than 2/3rd of total sample farmers had technical efficiency above 0.90. Various socioeconomic and technological factors may be responsible for the observed inefficiency and further rise in inefficiency in wheat production. Because of lack of information/data on these factors, this aspect has not been studied in the present paper, which could have provided an insight into the factors for policy framework.