Measurement of Technical Efficiency That Involving Farmers Preferences Towards Risk of Rice Farming in Malang (Indonesia)

Abstract

The aim of this research is to analyse the level of technical efficiency of rice farming by considering farmer preferences towards natural and technological risks. This research is conducted in selected regions in Malang Regency (Indonesia) with the consideration that farmers in selected areas can produce high productivity, but productivity growth fluctuates very sharply each year (within 13 years). Natural phenomenon that often appears as the risks of farming, such as, floods, droughts, and hurricanes. While, the application of technology is the part of the risks of farming, too, because farmers are not willing to adopt the technology which facilitated by the government. Rice farmers who used respondents are 305 people namely spread in seven selected regions in two seasons. The method used are a) Expected Utility of Money to measure the farmer preferences towards the risks and b) Stochastic Frontier Translog production function with Maximum Likelihood Estimation (MLE) approach to analyse the level of technical efficiency of farming. The results found that 77.7% of farmers have averter risk preferences, the level of technical efficiency obtained at 0.75 by pooling the data, and the influence of the preference of farmers to sources of technical inefficiency is -0622. Recommendation submitted is induced the technology with mentoring system and immediately implement the agricultural insurance.

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“…Coelli [22] had developed the software FRONTIER 4.1c, which can be used to generate both the stochastic production frontier and the inefficiency model simultaneously. Moreover, the FRONTIER 4.1c was widely applied in different fields of research in the recent years, especially in agricultural studies like [15,17,20,[23][24][25][26][27][28] for instance. 1 According to 14.…”

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