UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS TECHNICAL EFFICIENCY OF POULTRY FARMS IN VIETNAM NON-PARAMETRIC AND PARAMETRIC APPROACHES BY NGUYỄN THỊ NGỌC LINH MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2013 123doc UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS TECHNICAL EFFICIENCY OF POULTRY FARMS IN VIETNAM NON-PARAMETRIC AND PARAMETRIC APPROACHES A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY NGUYỄN THỊ NGỌC LINH Academic Supervisor: DR. TRƢƠNG ĐĂNG THỤY Ho Chi Minh City, December 2013 123doc DECLARATION This is to certify that the thesis entitle “Technical efficiency of Vietnam poultry farms: non-parametric and parametric approaches”, which is submitted by me in partial fulfillment of the requirement for the degree of Master of Art in Development Economic to Vietnam – The Netherlands Programme. The thesis comprises only my original work and due supervision and acknowledgement have been made in the text to all materials used. Nguyễn Thị Ngọc Linh i 123doc ACKNOWLEDGEMENT My appreciation firstly goes to my supervisor, Dr.
Trƣơng Đăng Thụy, who has made a great effort to support me in this thesis. His profound comments have been helpful not only in completing this study but also in improving my knowledge in doing the research. I would like to thank my family, especially my mother. I would not complete this thesis, as well as study in this program, without their scarification, encouragement and important support.
For the love and expectation of my family, which motivate my effort to complete this master degree, my mere expression of gratitude here have never been sufficient. I am very proud to attend this program. I am grateful to all lectures in Vietnam – Netherlands Programme for their dedicated instruction and all the courses during the period I studied at the program. Besides, I would like to thank all the academic and technical staffs of the Vietnam – Netherlands Programme for supporting me during that time.
Moreover, I received the enormous encouragement from my classmates and workmates, especially my special friend who has supported me a lot in the writing process. I am very grateful for everything that all of you gave me. ii 123doc ABBREVIATION AE Allocative efficiency BCC DEA model as study of Banker, Charnes and Cooper CCR DEA model as study of Charnes, Cooper and Rhodes CRS Constant returns to scale DEA Data Envelopment Analysis DMU Decision making unit DPF Deterministic Production Function FAO Food and Agriculture Organization GSO General Statistic Office ML Maximum likelihood MLE Maximum likelihood estimate OLS Ordinary Least Square PDF Probability density function SFM Stochastic Frontier Model TE Technical efficiency VHLSS Vietnam Household Living Standards Survey VND Vietnam Dong VRS Variable returns to scale iii 123doc ABSTRACT This study attempts to estimate the technical efficiency as well as determine the factorial effects of technical efficiency level of Vietnam poultry farms under semi- industrial system and traditional system. Then, this study employs a two-stage analysis with a household-level dataset in whole country.
In particular, the first stage estimates technical efficiency level of poultry farms under both systems through non-parametric and parametric approaches, which were represented by Data Envelopment Analysis and Stochastic Frontier Analysis, respectively. In the second stage, sources of efficiency will be determined by Tobit regression and least square regression with household- specific characteristics which represent for human capital in qualitative dimension. A sample of 3,356 households in VHLSS 2010 is utilized to analyze the broiler poultry production in Vietnam, wherein 820 poultry farms under semi-industrial system and 2,536 poultry farms under traditional system. The results from the first stage show that the average technical efficiency which was obtained from SFM is higher than that in DEA; and the TE scores in SFA exhibit the variability lower than TE scores in DEA.
Moreover, from the analysis in the second stage, it is can be stated that education level of farmer has significantly effects on the TE differential among poultry farms in the positive way. Finally, the results also show that TE scores of poultry farms under both systems located in the Southeast are higher than other agro-ecological regions. Keywords: poultry household, data envelopment analysis, stochastic frontier model, technical efficiency, human capital. iv 123doc TABLE OF CONTENTS CHAPTER 1: INTRODUCTION.
5 CHAPTER 2: LITERATURE REVIEW .1 Basic concepts of efficiency .2 Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) .1 Data Envelopment Analysis (DEA) .2 Stochastic Frontier Model approach (SFM).1 The Production frontier. Deterministic Production Frontier. Stochastic Production Frontier. Modified Ordinary Least Squares (MOLS).
Maximum likelihood Estimation (MLE) .3 Measurement of Efficiency. Comparison between DEA and SFM approaches .1 Measurement of technical efficiency of poultry subsector .2 DEA and SFM approaches on measurement of technical efficiency of agriculture sector .3 Impact of human capital on agriculture productivity. 24 CHAPTER 3: OVER VIEW OF POULTRY FARMS IN VIETNAM .1 General characteristics of poultry production in Vietnam .2 Poultry production system in Vietnam. Traditional extensive household poultry production (non-intensive system).
Semi-industrial commercial poultry production (semi-intensive). Industrial poultry production (intensive system). 32 v 123doc CHAPTER 4: DATA DESCRIPTIONS AND RESEARCH METHODOLOGY .2 Method, Model specification and Variables definition .1 The first stage: Measurement of Technical efficiency .1 Measurement of Technical efficiency using Data Envelopment Analysis .2 Measurement of Technical efficiency using Stochastic Frontier Model. Production function specification.
Estimation method specification .3 Variables Description for the first stage. Functional form specification test. Estimating method specification test .2 The second stage: Factorial decomposition of Technical efficiency .1 The Technical efficiency model .2 Variables description for the second stage. 53 CHAPTER 5: EMPIRICAL RESULTS AND DISSCUSION .1 The first stage: The estimation of the Technical efficiency scores .1 Testing null hypotheses for SFM approach in the first stage.
The Production Functional form specification test. The model specification test .2 Discussion on results obtained from the first stage.1 Comparing the Technical efficiency scores in SFM and DEA approaches .2 The distribution of technical efficiency scores in SFM and DEA approaches .3 Technical efficiency varies between agro-ecological regions .2 The second stage: The determinants of Technical efficiency.1 Testing the significant of coefficients simultaneously for regressions .2 Discussion on the results obtained from the second stage .1 The effects of human capital on technical efficiency scores .2 The difference of technical efficiency scores between various agro- ecological regions. 69 CHAPTER 6: CONCLUSION AND POLICY IMPLICATION .3 Limitations of study and recommendations for future research. 74 Appendix 1: Matrix of correlation between variables in Stochastic frontier production function of semi-industrial poultry farms.
78 Appendix 2: Matrix of correlation between variables in Stochastic frontier production function of traditional poultry farms. 78 Appendix 3: Matrix of correlation between variables in technical efficiency model of semi-industrial poultry farms. 79 Appendix 4: Matrix of correlation between variables in technical efficiency model of traditional poultry farms. 79 Appendix 5: OLS regression of technical efficiency model of traditional poultry farms.
80 Appendix 6: Testing heteroskedasticity for OLS regression of technical efficiency model of traditional poultry farms. 80 Appendix 7: Testing heteroskedasticity for OLS-robust regression of technical efficiency model of traditional poultry farms. 81 Appendix 8: Summary of Empirical Studies at measuring technical efficiency of poultry sector. 82 Appendix 9: Summary empirical studies of comparison DEA and SFM approaches at measuring the technical efficiency.
84 vii 123doc LIST OF TABLES Table 4-1: Summary statistic of broiler poultry productivity of farms between regions and within systems. 35 Table 4-2: Summary statistic of Input and Output variables for Poultry farms under semi-industrial system and traditional system. 42 Table 4-3: Statistical description of determinant factors of technical efficiency level. 52 Table 5-1: Maximum-likelihood estimates of the Cobb-Douglas and Translog stochastic production frontier models.
56 Table 5-2: Tests hypotheses of the production function specification. 58 Table 5-3: Summarizing the technical efficiency scores. 59 Table 5-4: The technical efficiency distribution in SFM and DEA-BCC. 61 Table 5-5: Technical efficiency scores among agro-ecological regions.
63 Table 5-6: The factorial effects on technical efficiency scores from SFM and DEA- BCC. 66 LIST OF FIGURES Figure 2-1: Technical efficiency and Allocative Efficiency. 8 Figure 2-2: Stochastic Production Frontier. 14 Figure 3-1: Growth rate of livestock and poultry with base year of 1990.
27 Figure 3-2: Annual growth rate of number of poultry with base year of 1990. 28 Figure 3-3: Poultry density of Vietnam in 2006. 29 Figure 3-4: Average number of birds per household in 2001. 29 Figure 3-5: Regional Characteristics of poultry-holding household in 2002.
30 Figure 3-6: Proportion of total chicken in three production systems in 2006 and 2009 in Vietnam. 33 Figure 5-1: The distribution of TE scores of semi-industrial and traditional systems from SFM and DEA approaches. 62 Figure 5-2: Technical efficiency scores between agro-ecological regions. 64 viii 123doc CHAPTER 1 INTRODUCTION 1.1 Problem Statements In the period from 1971 to 1995, the dramatically increasing consumption demand for livestock and production of livestock named “Livestock Revolution” had a remarkable contribution to socio-economic development in developing countries, especially in agriculture sector (Delgado et al.
The benefits from livestock subsector were analyzed in many aspects including ensuring food security, reducing unemployment and alleviating poverty in rural areas, and supplying materials for other sectors both in industry and in agriculture (Delgado et al. Besides, poultry raising subsector has some advantages compared to other livestock subsectors such as the high rate of reproduction and the quick return on capital investment while a large area is not required. Therefore, the poor households can keep a dozen of chickens (Sugiyama et al. Similarly, in Vietnamese villages, poultry is one of the most common products and becomes more and more popular because of its advantages.
Poultry production increases more rapidly than other animal raising ones. In particular, the annual growth of head count in poultry is 5% higher than the 2% average growth rate of livestock sector in the period from 1990 to 2010. Furthermore, national poultry population is well developed across the country, mainly in the North regions which comprises around 78% of total poultry population; and the proportion of poultry keeping households rises sharply from nearly 64% in 2001 to 90% of all rural households in 2010 (GSO, 2011). The popularity of poultry keeping households indicates that poultry production becomes an important resource; it may play a significant role in enhancing living standards such as raising income, creating jobs or improving human nutrition in Vietnamese rural areas.
However, a remaining puzzle is whether farmers can expand poultry production without an increase in investment or flock size of birds since most poultry keeping households in Vietnam rely on the traditional system. In other words, the fact raises a question for farmer and policy maker on how to produce maximal 1 123doc output at limited resources in their production process. Given the foregoing problems, analyzing technical efficiency of poultry farms is helpful to improve rural livelihood. The efficiency concept was first presented by Koopmans (1951) that decision making units (DMU) obtain efficiency point when they produce maximal outputs at a given level of inputs or require the minimal inputs to produce a given level of outputs.
The aggregate combination of optimal output that can be obtained at a given input level is the production frontier. The technical efficiency level of a DMU is estimated by the distance from the observed output to the production frontier. Since then, the technical efficiency concept has become the axiom of latter studies in measuring efficiency level of DMU such as pioneering works of Farrell (1957).