Profit Efficiency of Rice Farms in Wet-Season Lowlands in Champhone District, Savannakhet Province, Lao PDR

Abstract

This study analyzed factors affecting profit efficiency of rice farms in wet-season lowlands in the Champhone District of Savannakhet Province in the Lao People’s Democratic Republic based on a farmer’s decision to maximize profits. The profit efficiency approach has an advantage in that it provides insights into both inputs and outputs. To analyze profit efficiency, the stochastic production frontier model with assumptions about the time period and types of inputs was applied in the study. The study found similar results to previous studies related to efficiency measurements using a stochastic frontier analysis. Rice production and selling prices have positive signs with respect to the rate of return; however, costs of labor, seed, irrigation, fertilizers, and maintenance have negative signs with respect to the rate of revenue. However, the results from the inefficiency model showed the different role of education. The previous studies found that education level did not play an important role in improving rice productivity in Laos, however, the present study found that education level played a significant role in increasing profits.

Keywords

• stochastic frontier model
• profits efficiency
• wet-season lowland rice