Technical efficiency indicator for economic sustainability in Koga Irrigation and Watershed Project: Ethiopia

Abstract

Economic sustainability is particularly important in agriculture. It is related to the basic economic goal of farmers and the reason for their economic activities. Household-level adaptation and mitigation measures reflect the relative importance of economic goals for sustainability. Researchers collected data via a questionnaire designed to include household demographics, farm-specific variables, inputs, and outputs. The empirical model uses stochastic frontier and technical inefficiency models to analyze economic sustainability. Bered and Teleta were the two most economically sustainable and unsustainable regions. Differences in levels of economic sustainability have been attributed to characteristics that are expected to vary from household to household and from region to region. Output-oriented and input-oriented measures of inefficiency loss show that agriculture can be more economically sustainable as long as it is less efficient. Farmers could expand production with existing inputs, or they could reduce their inputs without lowering production levels. In addition, the return to scale was compared with the growth potential in each region. The political decision makers, therefore, seem to emphasize efforts to improve efficiency instead of investing in new technologies and inputs for the greater economic sustainability of the Koga Irrigation and Watershed Project.

Keywords

• Technical efficiency
• economic sustainability
• capacity utilization
• inefficiency loss
• input-oriented model
• output-oriented model