Studies on Economic Efficiency of Coffee Production in Ilu Abbabor Zone, Oromia Region, Ethiopia.

Mustefa Bati, Alemu Ayele, Mulugeta Tilahun, Raja Kumar Parabathina

Department of Agricultural Economics, Bedele College of Agriculture and Forestry, Mettu University, Mettu, Ethiopia.

Department of Biomedical Sciences, College of Medical and Health Sciences, Mettu University, Mettu, Ethiopia.

Accepted 7 November, 2017

Citation: Bati M, Ayele A, Tilahun M, Parabathina RK (2017). Studies on Economic Efficiency of Coffee Production in Ilu Abbabor Zone, Oromia Region, Ethiopia. Journal of Agricultural Economics and Rural Development 3(3): 293-306.


Copyright: © 2017 Parabathina et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are cited.


The study was carried out in six districts of IluAbbabor zone of the production year of 2015/16.  Coffee is the major crop but its productivity is low. This can be improved by using the available resource and technology. This study analyzed the efficiency of coffee production and assessing the potential for improvement. Cross-sectional data were used to analyze the economic efficiency of coffee production and identify its determinants factors from 200 farmers were selected using probability proportional sampling technique. The parametric stochastic frontier approach was employed to measure economic efficiency. The results indicate very low levels of technical, allocative and economic efficiency among coffee farmers. The production function indicated that labor was the only variable that had a positive and significant impact in determining coffee production. The mean technical efficiency (TE), allocative efficiency (AE) and economic efficiency (EE) of the household calculated from parametric approach of stochastic frontier analysis were 71.71%, 14.13% and 10.12% respectively. Relationships between TE, AE, and EE, and various variables were expected to have effect on efficiency were examined. An important conclusion emanating from this study is that AE appears to be more significant than TE as a source of gain in EE. From a policy point of view age of the household head, access to credit, land fragmentation, family size and total farmland are the variables found to be the most promising for improving efficiencies of coffee productions. Therefore, policies and strategies of the government should be directed towards the above-mentioned determinants.

Keywords: Coffee, efficiency, Cobb-Dougals, Stochastic frontier, tobit