Determinants of Technical Efficiency in Cow Milk Production in Kurunegala District: An Application of Data Envelopment Analysis

Abstract

The aim of this study was to determine the level of technical efficiency scores under the assumptions of both constant returns and variable returns to scales on a sample of 150 cow milk producers in Kurunegala District, Sri Lanka. A structured questionnaire was used to gather the data during 2022 in the study and those data were analysed by Data Envelopment Analysis and Tobit regression model. Results of the data envelopment analysis based on input - oriented reveal that, mean technical efficiency scores estimated for constant returns and variable returns to scales were 0.782 and 0.887, respectively, indicating that substantial inefficiencies occurred in operations among the sample farmers. Further, with respect to returns to scale, out of the 150 dairy farmers, 21 were found to be operating at the constant returns to scale while, 122 and 7 were operating at an increasing return to scale and decreasing returns to scale respectively. Tobit regression model was applied to examine the factors influencing the technical efficiency under the specifications of constant returns to scale, variable returns to scale, and scale effects. The study found that age, sex, family size, credit accessibility, and milking frequency were significantly influence the technical efficiencies in dairy farming. These findings could help to increase the milk production and technical efficiency of cow milk production in the study area. JEL: D24, O13, Q12,