Effect of maize cluster farming on smallholder farmers’ technical efficiency: evidence from Southern Ethiopia

Agriculture plays a crucial role in Ethiopia's economy in terms of employment and overall output. However, the sector's productivity remains suboptimal due to fragmented production and institutional inefficiencies. As a result, the design of an effective food production policy has emerged as a resilience strategy to enhance productivity. The Ethiopian government implemented a cluster-based crop production strategy in line with this. However, there is inadequate evidence regarding whether this policy has improved production efficiency. This study, therefore, investigated the impact of maize cluster-based production on the technical efficiency of smallholder farmers in southern Ethiopia. To assess the efficiency and the effects of cluster farming, we employed stochastic frontier and endogenous switching regression (ESR) models, respectively. Data were collected from 421 randomly selected smallholder farmers during the 2021 production season, and the translog production function frontier model was used to analyze efficiency. Of the sample, 49% were in clusters, and 51% were not. The results from the stochastic translog frontier model revealed that maize output is most responsive to land input relative to others. The estimated technical efficiencies were 74% for cluster farmers and 60% for non-cluster farmers, indicating that cluster-based production reduces technical inefficiency and enhances efficiency. The first stage of the ESR model identified several significant factors influencing household participation in cluster farming, including sex, oxen ownership, frequency of extension contacts, market distance, and access to credit. The ESR model also showed that cluster-based farmers would theoretically lose 18% (ATT) in technical efficiency if they did not engage in cluster production, while non-cluster farmers would theoretically gain 33% in technical efficiency if they participated in cluster farming. Consequently, policymakers and development organizations should focus on promoting clustering in crop production while addressing key factors influencing farmers'participation.