Does neighborhood matter? Spatial proximity and farmers' technical efficiency

This article examines the effects of neighborhood on the farmer's technical efficiency (TE) level, adopting a stochastic frontier and spatial Durbin regression models. Our study exploits a three-wave household-level panel data from the Ethiopian Rural Socioeconomic Survey (ERSS) collected between 2011 and 2015. We find that farmers have an average TE score of 53%, implying a substantial potential for improvement in the production level. We further find that there is a positive and statistically significant spatial interdependence in TE levels between farms in neighboring communities. Input use, education, and other demographic characteristics are found to have significant positive direct and indirect effects. The findings suggest that policies and programs targeting productivity improvements in agriculture need to consider spatial spillover effects.

Automated summary

This study examines the impact of neighborhood on the technical efficiency level of farmers. By utilizing stochastic frontier and spatial Durbin regression models, the study finds that farmers have an average technical efficiency score of 53%, indicating a significant potential for improvement. The study also reveals a positive and statistically significant spatial interdependence in technical efficiency levels between farms in neighboring communities. Inputs use, education, and demographic characteristics are identified as significant factors influencing technical efficiency. The findings suggest the need for policies and programs that consider spatial spillover effects to enhance agricultural productivity.