Assessment of allocative efficiency of smallholder tea farmers: evidence from Kabale and Kanungu districts, Uganda

Abstract

Smallholder productivity and efficiency still remain a paradox especially in perennial crops with past research presenting mixed results on allocative efficiency of smallholder farmers. The purpose of the study was to determine allocative efficiency and its influencing factors among smallholder tea farmers in Kabale and Kanungu districts, Uganda. This study utilized cross-sectional survey data collected from a random sample of 170 tea farmers in the districts of Kabale and Kanungu. The study employed a Stochastic Frontier Approach (SFA) and the Value of Marginal Product Approach (VMPA) in determining the input elasticities and allocative efficiency levels respectively. Thereafter, an Ordinary Least Squares (OLS) regression model was used to investigate the determinants of allocative efficiency. Results from the SFA and the VMPA showed that average allocative efficiency levels for land, fertilizer, labour and herbicide were 11.17, 1.68, 3.08 and 4.43 respectively. Finally, the OLS model regression results indicated that; allocative efficiency of fertilizer was positively and significantly determined by; farm size, size of household, herbicide type and times visited by the extension staff while herbicide was positively and significantly determined by; size of household extension access, marital status of the household head, type of herbicide. While allocative efficiency for land was positively influenced by age of household head, district of the respondent being Kabale, extension access. Finally, allocative efficiency of labour was positively influenced by farm size, having a contract, and district of the respondent being Kabale.