Technical Efficiency of Kenyan Smallholder Dairy Farmers in Different Agro-ecological Regions

Abstract

We employ stochastic meta-frontier and region-specific frontiers based on the “true” random effect framework to examine technical efficiencies, technology gaps and meta-frontier technical efficiency of Kenyan smallholder dairy farmers in different agro-ecological zones. The empirical analysis is based on comprehensive three-wave household level panel data from across three agro-ecological zones in Kenya. Results show variations in efficiency measures and that smallholder milk production is characterized by increasing returns scale across all agro-ecological zones. The results indicate that the milk output of smallholder dairy farmers from all the agro-ecological zones lags behind their potential with the technology available and the prevailing enviromnetal conditions in their agro-ecological zones. We also, find that there exists a significant technology gap in dairy production across the agro-ecological zones in Kenya. These findings generate important policy implication for achieving increased technical efficiency and reduce the technology gap in smallholder dairy production.