The Impact of Education on Allocative and Technical Efficiency of Farmers: The Case of Ethiopian Small Holders
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Date
1997-06
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A.A.U
Abstract
With the growing interest in human capital theory, analyzing the impact of
education on efficiency has been given special emphasis. this study first
testes the celebrated hypothesis that 'traditional farmers are efficient but
poor'. the result of the stochastic profit frontier function does not support
this hypothesis in the Ethiopian case. the result shows that there are
considerable amount of deviations from the optimal profit efficiency level. it
specifically shows that the mean level of profit efficiency in the sampled
fanners is 54.0 percent. this implies that there is 46.0 percent profit
inefficiency in the sampled farmers. next it is tried to test the hypothesis of
equal allocative and technical efficiency of educated and illiterate farmers by
using the modified Y-L profit function model under various linear
restrictions. the results reveal that educated farmers are relatively and
absolutely more efficient than illiterate fanners. this implies that at the
existing level of factor endowments and technology there is a potential to
increase agricultural output by expanding education and consequently by
making illiterate farmers to operate closer to the efficiency level achieved by
their educated neighbors. It is also shown that education increases not only
the efficiency of farmers but also the probability of farmers to adopt
improved inputs such as fertilizer. the multinomial probit analysis also
shows that education and environment variables are substitutes in modem
areas and complementary in traditional environments. this suggests that expansion of schools and increasing enrollment rates in rural areas have
higher payoff than in modem areas at least in increasing the probability of
farmers to adopt fertilizer input.
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Keywords
efficiency, holders