The Impact of Agricultural Extension Services on Farm Household Efficiency in Ethiopia

Type Working Paper - International Food Policy Research Institute (IFPRI), Eastern and Southern Africa Regional Office (ESARO),
Title The Impact of Agricultural Extension Services on Farm Household Efficiency in Ethiopia
Publication (Day/Month/Year) 2011
One of the major policy shifts in Ethiopia since 1992 has been the substantial emphasis placed on
improving the productivity of smallholder agriculture through increased use of a package of
improved agricultural technologies. Smallholder agriculture producers are increasingly able to
select economically viable technologies and practices for maximum and efficient production
(MoFED, 2010).
The Rural Capacity Building Project (RCBP) is one of the many programs designed to enhance
the productivity of farmers in Ethiopia. The RCBP is a World Bank/CIDA financed program
implemented by the Ministry of Agriculture. The project supports the government’s endeavor to
improve the access and quality of the agricultural extension system and make the service client
oriented to address the demands of farmers and pastoralists. The overarching expected outcomes
of the initiative are to expand the choices of adoption of new and usable agricultural
technologies, increase agricultural productivity, and thereby bring significant positive income
change for farming households.
This would be achieved by: (i) modernizing the Agricultural Extension, Technical and
Vocational Education and Training (ATVET) colleges by making them more responsive to the
changing needs of a demand-driven and market-driven agricultural sector; (ii) building capacity
in the agricultural extension system while piloting new initiatives to introduce demand-driven
and participatory mechanisms; (iii) a strengthened agricultural research system with improved
institutional and human capacity to generate and disseminate client-demanded and marketoriented
technologies; (iv) development of agricultural market institutions; and the integration of
gender equality, HIV/AIDS and environment issues.
Studies of grain farmers have investigated the optimal way of converting inputs into outputs, i.e.
raising technical efficiency (Heshmati and Kumbhakar, 1997; Seyoum et al., 1998; Wilson et al.,
2001). Seyoum, et al. (1998) investigated the efficiency of maize producers in eastern Ethiopia.
Nonetheless, little attention has been given to the impact of agricultural extension services on
productivity and efficiency at the farm level. This paper aims to fill this gap.As part of the mid-term evaluation of the RCBP, a study was carried out to assess whether RCBP
participating smallholders have a greater overall productivity and technical efficiency than
farmers outside the project. The objective of this paper is, therefore, to investigate and compare
the technical efficiency of project participants and non-participants. Agricultural production is
heterogeneous and farms differ in many ways, making it important that this heterogeneity is
accounted for in production analysis (Just, 2000; Just and Pope, 2002). Heterogeneity may also
be present because of the targeting of farm households by agricultural researchers and extension
services. Depending on who is targeted by these public service providers, attitudes towards
farming and skills are likely to vary across individual farms. Studies have shown that farmer
characteristics such as farmer’s age, farming experience, access to extension services, marital
status, and education level affect farm productivity (Seyoum, et al., 1998; Pickett, 1991; Uaiene
and Arndt, 2009).
The frontier production function specifies what output can be achieved, if all decisions were
taken according to their best practices (Friebel et al, 2003). In smallholder farming, a farm’s
technical efficiency is a measure of its ability to produce relative to the smallholder’s bestpractice
frontier, the maximum output possible from a given set of inputs and production
technology (Aigner, Lovell, and Schmidt 1977; Meeusen and van den Broeck 1977). Technical
inefficiency on the other hand is the deviation of an individual smallholder farm’s production
from the best practice frontier. The level of technical efficiency of a particular firm (farm in our
case) is based upon deviations of observed output from the efficient production frontier (Greene,
1993). If the actual production point lies on the frontier it is perfectly efficient. If it lies below the
frontier then it is technically inefficient. The distance between the actual to the achievable
optimum production from given inputs, indicates the level of production inefficiency of the
individual firm (Greene, 1993; Friebel et al, 2003).
We estimate a stochastic frontier production function to analyze differences in technical
efficiency between RCBP participating and non-participating smallholders in Ethiopia. The
analytical framework used in this paper follows the Cobb-Douglas production function model of
the Stochastic Frontier Analysis (SFA). The SFA assumes the existence of technical
inefficiencies of production of farmers involved in producing a particular output. The CobbDouglas
production function expresses output as a function of inputs which capture the degree to 4
which farm households produce below the frontier level of production, i.e. inefficiencies
(Kumbhakar and Lowell, 2000)

Related studies