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Technical Efficiency in Vietnamese Agricultural Production

Technical Efficiency in Vietnamese Agricultural Production. HA NOI. Lecture : Prof. Jae B ong CHANG Department : Livestock Business and Marketing Economics ECONOMETRICS CLASS. HO CHI MINH CITY. Pham Thi Phuong Loan. Konkuk University, June 7 2018. VIETNAM COUNTRY PROFILE.

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Technical Efficiency in Vietnamese Agricultural Production

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  1. Technical Efficiency in Vietnamese Agricultural Production HA NOI Lecture: Prof. Jae Bong CHANG Department: Livestock Business and Marketing Economics ECONOMETRICS CLASS HO CHI MINH CITY • Pham Thi Phuong Loan • Konkuk University, June 7 2018

  2. VIETNAM COUNTRY PROFILE • Surface area: 330,967 km2 • Population: 96mil • (July 2017) (rank 15) • Life expectancy: 73.4 years • (2016) (rank 132) • Labor force: 54.93 mil (2016) • Unemployment rate: 3.7% (2016) Ha Noi Hai Phong Da Nang • GDP (PPP): $595.5 bil(2016) (rank 37) • GDP - real growth rate: 6.2% (2016) (rank 25) • GDP-per capita (PPP): $6,400 (2016) (rank 161) Agriculture - products: rice, coffee, rubber, tea, pepper, soybeans, cashews, sugar cane, peanuts, bananas; pork; poultry; seafood • Exports: $169.2 bil(2016) • Imports: $161 bil(2016) Binh Duong Ho Chi Minh City Industries: food processing, garments, shoes, machine-building; mining, coal, steel; cement, chemical fertilizer, glass, tires, oil, mobile phones Can Tho Source: www.cia.gov

  3. EXPORTS BY MAIN AGRICULTURAL COMMODITIES Source: General Department of Vietnam Customs, Customs Yearbook on International Merchandise Trade of Vietnam 2012, 2013, 2014, 2015, 2016

  4. Fruits

  5. Perennial crops

  6. Fishery Products

  7. INTRODUCTION - Rice is one of important agricultural products that ensure not only the country’s food security but its economic development as well. The efficiency of rice production has been an interest to economists (Kompas, 2004; Huynh & Yabe, 2011; Le, Lee, Peng, & Chung, 2017). Vietnam Studies on efficiency on agriculture in developing countries are conducted on sector, region or specific product level (Krasachat, 2000; Rangasamy & Venkataramani, 2006; Mugera, 2011; Jain & Jha, 2015; Sirikanchanarak, Liu, & Sriboonchitta, 2017; Parichatnon, Maichum, & Peng, 2017). This study analyzes the technical efficiency of Vietnamese agricultural production at household level and key factors impacting upon it Agriculture: important to developing countries - Vietnam: agriculture in GDP as 15.35%(2016), labor force as 41.9% in 2016 (GSO, 2018). Measuring, understanding efficiency in Agri

  8. LITERATURE REVIEWS • distinguished the two concepts of price efficiency and technical efficiency. The price efficiency measures a farm’s success to choose an optimal set of inputs with given prices while the other measures the farm’s to choose a proper production function to maximize its output with a given set of inputs Farrell (1957) • developed a stochastic frontier approach to measure technical efficiency. Aigner, Lovell, & Schmidt (1977 • presented the data envelopment analysis (DEA) as another approach to measuretechnical efficiency. Charnes, Cooper, & Rhodes, 1978)

  9. LITERATURE REVIEWS • Efficiency of agricultural output was 79 per cent at the district level (Rangasamy & Venkataramani, 2006); large farms are found to be more technical efficient followed by small and marginal farmers (Jain & Jha, 2015); high technical efficiency of Thai durian production and Chanthaburi province was recognized as the best province for this fruit production in Thailand Parichatnon, Maichum, & Peng (2017) India and Thailand • Overall technical efficiency in Dong Thap province achieved at 0.801 (Le, Lee, Peng, & Chung, 2017) while scale efficiency analysis showed that many rice farms in Vietnam were operating with less than optimal scale of operation (Vu, 2012) and the technical efficiency was around 0.816 (Huynh & Yabe, 2011). Vietnam (rice production technical efficiency)

  10. METHODOLOGY 1. A general stochastic production frontier model • Where • Yiis the output produced by household i, • X is a vector of inputs, • Viis the stochastic error term • Uiis a one-sided error representing the technical inefficiency of household i. • Both Vi and Uiare assumed to be independently and identically distributed (iid) with variance and respectively

  11. METHODOLOGY The production of each household i can be estimated as: The efficient level of production (i.e. no inefficiency) is defined as: Then technical efficiency (TE) can be given by If Uiequals zero, then TE equals one, and production is said to be technically efficient.

  12. METHODOLOGY 2. The household characteristics that could influence technical efficiency are specified in an inefficiency functional form The coefficients of the frontier and inefficiency effects model can be estimated by the maximum likelihood method. The maximum likelihood function is defined in terms of the variance parameters as follows or where γ and λ represents the share of technical inefficiency in the overall residual variance. If γ is close to zero, deviations from the frontier are largely attributable to noise, whereas a value close to unity indicates considerable technical inefficiency (Coelli, Rao, O'Donnell, & Battese, 2005)

  13. DATA AND VARIABLES Data: Use cross-sectional data from 2012 Vietnam access to resources household survey (VARHS) to examine technical efficiency on three sub-sectors as crops, livestocks and aquaculture. Red River Delta: Ha Tay North East: Lao Caiand PhuTho North West: Lai Chauand Dien Bien North Central Coast: Nghe An South Central Coast: Quang Nam and KhanhHoa Central Highlands: DakLak, DakNong, and Lam Dong Mekong River Delta: Long An The VARHS surveys were designed as collaborative research efforts with the objective of complementing the large and nationally representative Vietnam Household Living Standards (VHLSS). The VARHS surveys the same households every two years and is representative of households living in the rural areas of the 12 provinces

  14. DATA AND VARIABLES

  15. RESULTS Table 1. Summary Statistics of the Variables

  16. RESULTS Table 1. Summary Statistics of the Variables

  17. Table 2.Stochastic production frontier and inefficiency functional models RESULTS

  18. RESULTS Table 2.Stochastic production frontier and inefficiency functional models

  19. RESULTS Table 2.Stochastic production frontier and inefficiency functional models

  20. RESULTS Table 3.The technical efficiency (TE) The technical efficiency provides the proof that Vietnamese households have highest technical efficiency in crop cultivation with the average score at 96%. The aquaculture is also a comparative advandtage of Vietnamese households with the technical efficiency mean at 73%. Livestocks is not a strength of Vietnamese agriculture when the technical efficiency is around 61%. However the overall agriculture technical efficiency stands only at 61%.

  21. CONCLUSIONS This study uses a stochastic frontier analysis (SFA) and technical efficiency effect model to analyze the technical efficiency of Vietnamese agricultural production at household level and key factors impacting upon it. Vietnamese households have highest technical efficiency in crop cultivation with the average score at 96%while aquaculture and livestocks have technical efficiency mean at 73%and 61%. However the overall agriculture technical efficiency stands only at 61%.

  22. THANK YOU!

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