Production Efficiency and Market Orientation in Food Crops in North West Ethiopia: Application of Matching Technique for Impact Assessment

<div><p>Introduction</p><p>Agricultural technologies developed by national and international research institutions were not benefiting the rural population of Ethiopia to the extent desired. As a response, integrated agricultural extension approaches are proposed as a key strategy to transform the smallholder farming sector. Improving Productivity and Market Success (IPMS) of Ethiopian Farmers project is one of the development projects initiated by integrating productivity enhancement technological schemes with market development model. This paper explores the impact of the project intervention in the smallholder farmers’ wellbeing.</p><p>Methods</p><p>To test the research hypothesis of whether the project brought a significant change in the input use, marketed surplus, efficiency and income of farm households, we use a cross-section data from 200 smallholder farmers in Northwest Ethiopia, collected through multi-stage sampling procedure. To control for self-selection from observable characteristics of the farm households, we employ Propensity Score Matching (PSM). We finally use Data Envelopment Analysis (DEA) techniques to estimate technical efficiency of farm households.</p><p>Results</p><p>The outcome of the research is in line with the premises that the participation of the household in the IPMS project improves purchased input use, marketed surplus, efficiency of farms and the overall gain from farming. The participant households on average employ more purchased agricultural inputs and gain higher gross margin from the production activities as compared to the non-participant households. The non-participant households on average supply less output (measured both in monetary terms and proportion of total produce) to the market as compared to their participant counterparts. Except for the technical efficiency of production in potato, project participant households are better-off in production efficiency compared with the non-participant counterparts.</p><p>Conclusion</p><p>We verified the idea that Improving Productivity and Market Success (IPMS) of Ethiopian farmers’ project has contributed for the input and out market integration and/or market oriented agricultural production. Overall, we argue that these can be seen as an experimental model with a promising potential to improve the livelihood of the poor. Furthermore, we suggest that it is worthwhile to employ integrated agricultural extension programs with further targeting in the developing world.</p></div

ATT of the project on farm efficiency.

<p>ATT of the project on farm efficiency.</p

Summary statistics of the dataset.

<p>Summary statistics of the dataset.</p

ATT of the project on market orientation.

<p>ATT of the project on market orientation.</p

Logit results of households’ project participation.

<p>Logit results of households’ project participation.</p

Performance of matching estimators under the three criteria.

<p>Performance of matching estimators under the three criteria.</p

EXPOSSURE TO RISK AND RISK MANAGEMENT IN SMALLHOLDER AGRICULTURE

Using a moment based approach, introduced by Antle for producers’ risk behavior elicitation, we develop an empirical model to evaluate the implication of risk preferences on farm portfolio decisions. With a comprehensive household level panel data of rounds of 2004 and 2009, we estimate risk aversion behavior of farm households in uncertain climate and market imperfections. To solve the problem of endogeneity, the risk parameter is instrumented in a two stage maximum likelihood estimation technique, and used as a determinant of the level of farm level diversification. We find that farmers with higher level of relative risk premium will more likely opt for diversified farms. The engagement of farm households to off and non-farm income generating activities could likely reduce the on-farm diversification level. On-farm diversification and engagement in off-farm and non-farm activities can be considered as substitutable risk mitigation strategie

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This paper explores the implication of the rural non-farm employment and waged agricultural employment for income and risk mitigation of agricultural households in Ethiopia. We use a nationally representative panel dataset, and employ endogenous switching mixed multinomial logit model. After we control the selection bias that can arise from employment selection in rural households stemming both from observed and unobserved characteristics, we do find an evidence that the non-farm sector improves the income of the agricultural households, and serve as risk mitigation tool in rural Ethiopia. Combining the non-farm sector with hiring labor for agricultural activities at times of labor shortage increases the variance and contributes to positive skewness of income. Finally, we suggest that the rural non-farm sector could serve as a key development pathway for improving livelihood in the predominantly smallholder production system in Ethiopia

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