Technical Efficiency of Thai Jasmine Rice Farmers: Comparing Price Support Program Participants and Non-Participants

The rice price support program (PSP) in Thailand is designed to support rice prices and raise incomes of rice farmers. However, it has been argued that the program only attracts participation from certain types of farmers, in particular larger and more efficient farmers with higher farm incomes. This raises the question of whether there is a difference in the technical efficiency of program participants and non-participants. This paper investigates two issues: (a) what are the key determinants of farmers’ decision to participate in the PSP? and (b) do program participants and non-participants use different rice production technologies and have different levels of technical efficiency. We take a stochastic frontier approach to answering these questions but because farmers self-select into the PSP the standard stochastic frontier model may lead to biased estimation. In response we augment the standard stochastic frontier model with a participation equation explaining the decision to participate in the PSP, and then use Heckman’s two-step estimation and Greene’s sample selection stochastic production frontier model to explore levels of technical efficiency among participants and non-participants. Results indicate that the participation decision is governed by key factors that include land size and the financial position of the farm. Results also show there is no strong evidence to support the presence of selectivity bias in the stochastic frontier estimates. In addition, a likelihood-ratio test indicates that participants and non-participants use the same frontier production technology. The analysis of technical efficiency reveals that participants are more technically efficient than non-participants. The findings therefore suggest that larger farmers participate more in the PSP and that these program participants tend to be more technically efficient farmers.

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 Record created 2017-04-01, last modified 2017-04-26

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