Abstract

This study investigates the overall economic efficiency of chili pepper producers in the Volta region of Ghana. The study used farm level data to examine the productivity of selected agricultural inputs, technical, allocative and economic efficiency levels and the determinants of efficiency of chili pepper production. The modified translog stochastic frontier production and cost function models were adopted for the study using the maximum likelihood estimation procedure. Data was collected on 200 chili pepper producers through a multi-stage sampling technique. The results indicate that on average, chili farms were only 65.76% economically efficient, whilst mean technical and allocative efficiencies were estimated to be 70.97% and 92.65%, respectively. The findings also reveal that chili farms in the study are characterized by decreasing returns to scale. The results further show that age, experience and gender among others significantly influence technical efficiency. Allocative efficiency is however influenced by gender, education and access to credit inter alia. The joint effect of these variables explains the variation in the economic efficiency of the chili farms. The study therefore concludes that chili farms in the study area are economically less efficient. The study recommends policies and programs that aim at attracting the teaming youth into chili pepper cultivation to be pursued by giving them incentive packages. Experienced chili farmers are advised by the study not to solely rely on their know-how but should endeavour to complement their knowledge with advisory services given by extension officers. Policy makers should also focus on policies that will facilitate chili farmers’ access to low interest bank loans in the form of inputs.

Key words:       Stochastic frontier, modified translog model, maximum likelihood estimation, multi-stage sampling technique, chili pepper production.