Factors Determining TFP Increase in Small-Scale Lowland Rice Farming

Abstract

Rice is a strategic commodity, so the Government of Indonesia puts forward the standard of building a globally competitive rice farming model by increasing the Total Factor Productivity (TFP). However, until now, farm managers have had a relatively shallow understanding of the TFP concept. This study, focusing on lowland rice farming in Indonesia, identifies the factors that determine the development of the TFP. The main questions in this research are, what are the impacts of farming scale, technical efficiency, allocative efficiency, and the efficiency scale? Has lowland rice farming adopted technology to reduce wasting resources due to an inefficient use of inputs? This study used 329 cross-sectional pieces of data on small-scale rice farming. The research results indicate that lowland rice farming is in a decreasing return condition and that there is technical inefficiency. TFP tends to increase when the farm scale increases. Technical efficiency, allocative efficiency, and scale of efficiency are the main determining factors in developing TFP at the level of lowland rice farmers; of these, technical efficiency is the most important factor.

Technical Efficiency of Local Rice Farming in Tidal Swamp Areas of Central Kalimantan, Indonesia: Determinants and Implications

“…Over 1994-2014, approximately 1.2 million hectares of rice fields on Java Island were transformed, equating to nearly 60 thousand hectares per year [8]. Coupled with the plateauing growth in rice field production [9][10][11][12], these factors pose a significant threat to the rice supply, underscoring the need for agricultural development outside Java.…”