Efficiency and productivity of Nepalese agriculture

In the first chapter, a stochastic production frontier framework is used to examine the technical efficiency of rice production for a sample of irrigated farmers in the Rupandehi district of Nepal. Coefficient estimates from the production frontier indicate that: (a) source of irrigation and varietal choice are the two most important factors which enhance rice yields; (b) mid-season water stress and long term non-use of organic fertilizer, are the two primary factors which adversely effect rice yields. Farm level technical efficiency measures derived from the production frontier model, suggests that on average, rice yields could have potentially been increased by slightly over half a metric ton per hectare, corresponding to a 18% average increase in output, via a more efficient utilization of available resources at the current state of technology. I then explore for the relationship between technical efficiency and two sets of variables: (1) farmers's grasp of agronomic principles and knowledge; (2) socio-economic environment in which the farmer operates. I am particularly interested in examining how education and land ownership size is related to efficiency, two specific issues which have received considerable attention in the literature. I find a significant relationship between secondary education and efficiency. Average technical inefficiency in rice production is reduced by 16% in plots farmed by households in which the primary farm manager has completed more than five years of schooling. I also find a significant inverted U-shaped relation between technical inefficiency and land ownership size (i.e., a significant U-shaped efficiency-size relationship). However, the significance of this efficiency-size relationship appears to be sensitive to model specification/endogeneity bias.;In the second chapter, a stochastic production frontier approach embedded in a metaproduction function framework is used to: (a) estimate the district level rates of technical change in Nepalese agriculture based upon econometric estimation of the underlying production technology; (b) derive point estimates of district level technical efficiency from parametric estimation of the production technology; and (c) given that I am interested in comparing efficiency levels across districts, I also construct confidence intervals around the time varying technical efficiency estimates, using non-parametric bootstrap methods.;When literacy is included in the analysis, there appears to be no significant growth in TFP in the Terai region, while there appears to be a severe decline in TFP growth in the Hill region. Significant negative TFP growth rates in the Hill region might reflect a pernicious decline in the quantity/quality of the natural resource base, however, it is not possible to explicitly examine the interplay between natural resource degradation and agricultural productivity given the data available for this study. This study also highlights the fact that there exists substantial scope for increasing output via a better utilization of existing inputs and technologies in the Terai region. For example, agricultural output in 1991 could have been increased by 40% in the Terai region via a more efficient utilization of existing inputs and technologies. There also exists tremendous potential for increasing output in the all region, however, this potential is perhaps being squandered due to natural resource degradation.