Using measures of efficiency for regionally-targeted smallholder policy intervention: The case of Pakistan’s horticulture sector

Abstract

Abstract The empirical literature on the sources of production efficiency mostly focuses on technical and scale efficiency, and the relative importance of mix efficiency is often overlooked. This paper estimates input-oriented technical and mix efficiency using a farm-level survey dataset of 730 smallholder horticulture farms in Pakistan. We estimate a Bayesian stochastic production frontier model to draw precise statistical inferences by using finite sample properties. We find that the estimated mean mix inefficiency (0.65) is roughly as large as mean technical inefficiency (0.64). Moreover, we detect large technical and mix efficiency disparities across agro-climatic zones and farm sizes, which we attribute to suboptimal farm practices. We conclude that policy-makers should focus on strategies that target to improve both technical and mix inefficiency.