Abstract:
This study investigates production risk and technical inefficiency as two possible sources of the
production variability that characterized Malaysian Paddy Production. Data from a total of 397
Paddy farms randomly sampled from Muda Agricultural Development Authority (MADA) were
used for the analysis. The study used a trans-log stochastic frontier production function model
with flexible risk specification. The empirical estimates revealed that, mean output is positively
influenced by seed, fertilizer, agrochemicals and labour. Fertilizer and agrochemicals are found
to be risk-reducing inputs, while seed and labour are revealed to be risk-increasing inputs. This
implies that an average risk-averse producer is expected to use more of fertilizer and
agrochemicals and less of seed and labour compared to risk-neutral producer in the study area. It
was also revealed that extension visit, credit access, MR219 seed variety, MR220CL2 seed
variety, method of broadcasting and harvesting technology significantly reduces the technical
inefficiency of producers. Average technical efficiency of Paddy farms was found to be 83.6
percent indicating that a potential exist for improving paddy output in the study area |
