TITLE:
A Framework for Determining the Impact of Value Chain Participation on Smallholder Farm Efficiency
AUTHORS:
William Barnos Warsanga, Edward Anthony Evans, Zhifeng Gao, Pilar Useche
KEYWORDS:
Efficiency, Wheat, Tanzania, Propensity Score Matching, Stochastic Frontier Analysis
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.3,
April
20,
2017
ABSTRACT: We analyze the efficiency of wheat farmers toward the
ever-increasing demand for wheat in Tanzania. Translog production and cost
functions were utilized in the stochastic frontier analysis to examine
technical, allocative, and economic efficiencies (TE, AE, and EE) of wheat
farmers in Northern Tanzania. Propensity score matching through caliper radius
and nearest neighbor methods were utilized to analyze the impact of value chain
participation on smallholder farm efficiency levels. Analysis revealed that the
average TE, AE, and EE scores for farmers’ value chain participation were 79%,
80%, and 64%, respectively, in the study area, implying that wheat farmers
could still improve level of TE, AE, and EE by 21%, 20%, and 36%, respectively.
Caliper radius matching revealed that the net effects of farmers’ participation
in vertical coordination on TE, AE, and EE were 6.8%, 5.7%, and 8.7%,
respectively, while the net effects of farmers’ horizontal coordination
participation were 6.3%, 9.5%, and 11.6%, respectively. This indicates that
farmer’s participation in value chain (vertical and horizontal coordination)
would positively impact their level of wheat farm efficiencies. Based on the
results, we recommend the expansion of wheat plots and use of modern farming
technologies to increase wheat production in Tanzania. To further improve farm
unit efficiency, we recommend additional formal education for future farmers, more
on-farm extension training, and participation in the value chain through
contracts and farmers’ associations.