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Measuring Technical Efficiency and Frontier Intervention for Farm Machinery Manufacturers Using Slacks-Based Data Envelopment Analysis


Affiliations
1 Agricultural Mechanization Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
2 Technology Transfer Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
3 Agricultural Energy and Power Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
 

The objective of this study is to estimate technical efficiency of farm machinery manufacturers in Central India. The statistical test for the presence of technical inefficiency has been performed using stochastic frontier production model. Data envelopment analysis (DEA) has been used to identify existing returns to scale in farm machinery manufacturing units. The slacks-based DEA has been used to estimate input excess and output shortfall in the manufacturing system. Results indicate that out of the total variation, 69% was due to technical inefficiency in the manufacturing system, whereas 31% was due to stochastic errors. The estimated radius of stability was varied from 0 to 1.74 and the classification (efficient and inefficient manufacturers) was found robust against data alteration within the estimated radius of stability. The results showed that a manufacturer has to increase annual turnover by INR 40.7 million to become efficient.

Keywords

Data Envelopment Analysis, Farm Machinery, Frontier Intervention, Manufacturers, Technical Efficiency.
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  • Measuring Technical Efficiency and Frontier Intervention for Farm Machinery Manufacturers Using Slacks-Based Data Envelopment Analysis

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Authors

Manoj Kumar
Agricultural Mechanization Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
M. B. Tamhankar
Technology Transfer Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
Sandip Mandal
Agricultural Energy and Power Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
V. Bhushana Babu
Agricultural Mechanization Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India
Bikram Jyoti
Agricultural Mechanization Division, ICAR-Central Institute of Agricultural Engineering, Bhopal 462 038, India

Abstract


The objective of this study is to estimate technical efficiency of farm machinery manufacturers in Central India. The statistical test for the presence of technical inefficiency has been performed using stochastic frontier production model. Data envelopment analysis (DEA) has been used to identify existing returns to scale in farm machinery manufacturing units. The slacks-based DEA has been used to estimate input excess and output shortfall in the manufacturing system. Results indicate that out of the total variation, 69% was due to technical inefficiency in the manufacturing system, whereas 31% was due to stochastic errors. The estimated radius of stability was varied from 0 to 1.74 and the classification (efficient and inefficient manufacturers) was found robust against data alteration within the estimated radius of stability. The results showed that a manufacturer has to increase annual turnover by INR 40.7 million to become efficient.

Keywords


Data Envelopment Analysis, Farm Machinery, Frontier Intervention, Manufacturers, Technical Efficiency.

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DOI: https://doi.org/10.18520/cs%2Fv120%2Fi8%2F1350-1357