Analysis of Economic Efficiency in Rice Production Among Smallholder Farmers in Shabe Sombo District, Oromia Regional State, Ethiopia

Abstract

Ethiopia faces persistent food security challenges owing to rapid population growth and low agricultural productivity. This study examines the technical, allocative, and economic efficiency of smallholder rice producers in Shabe Sombo District, Oromia Region, and identifies factors influencing efficiency. A two-stage sampling technique was used to select 255 farmers; primary data were collected for the 2022/23 production year. A stochastic frontier approach with a Cobb–Douglas production function was applied to estimate efficiency levels, while a two-limit Tobit model was used to identify determinants of efficiency. Land, chemical inputs, oxen power, and seed positively and significantly influence rice output, with estimated returns to scale of 0.96 indicating decreasing returns. Mean technical, allocative, and economic efficiency stood at 94%, 75%, and 70% respectively, indicating that allocative inefficiency is the dominant source of overall efficiency loss. Tobit results show that farm distance from homestead, household size, and market distance negatively affect technical efficiency, while sex of household head, farm size, and extension contact frequency have positive effects. Age, education level, and livestock ownership negatively influence allocative and economic efficiency; training participation has a positive effect. Policy interventions should focus on strengthening extension services, expanding access to training and education, improving rural infrastructure and access to credit.