Estimating the Efficiency of Pahang Rubber Smallholders Using Data Envelopment Analysis Approach

Abstract

RISDA has targeted for the income of each smallholder to be at least RM2500 per month by the end of 2015. However, approximately almost 90% of the smallholders’ monthly income is still below the target. Hence, in order to observe if this target is achievable, a study was conducted to evaluate the efficiency level of producing rubber among 95 rubber smallholders in Pahang. In addition, the study also investigated if there was any opportunity for increment of production among the rubber smallholders. Therefore, the Data Envelopment Analysis (DEA) model, under the assumption of Variable Return to Scale (VRS) and Constant Return to Scale (CRS), was used to analyse the scale and the technical efficiency of the smallholders. Scale Efficiency was measured in order to estimate the return to scale of the smallholders. As a result, the study found that the average Overall Technical Efficiency (OTE) and Pure Technical Efficiency (PTE) scores of the smallholders were 43.47% and 43.78%, respectively. Thus, the majority of the smallholders were not technically efficient in producing rubber. Furthermore, based on the return to scale estimated, 41% of the smallholders were operating under the Increase Return to Scale (IRS), which implied that the smallholders had a sub-optimal scale size. The results obtained had been useful as the optimal input-output for the efficient rubber yield can be determined and may help RISDA, as well as agricultural planners, to devise a strategy in order to increase the productivity of rubber smallholders in Malaysia.

Non-Parametric Approach towards Smallholders Rubber Production Efficiency: A Two-Stage Data Envelopment Analysis (DEA)

“…potato and wheat (Louis and Joel [6]; Umanath and Rajasekar [7]; Mardani and Salarpour [8]; Usman, et al [9]; Raheli, et al [10]). Although the DEA has been widely utilized in most studies on annual crop efficiency, it has also been applied in studies on perennial tree crops such as cocoa, oil palm and rubber (Eyitayo,et al [11], Fadzim, et al [12], Ali, et al [13]). However, the DEA cannot estimate the factors affecting technical efficiency with the frontier production function simultaneously.…”