Estimating Supply Response in the Presence of Technical Inefficiency Using the Profit Function: An Application to Ethiopian Agriculture

摘要: Studies of supply response using the profit function have typically maintained neo- classical assumption efficiency. Using farm-level data from Northern Ethiopia, this study examines impact technical inefficiency on small holder farmers. Two systems output and input demand functions are estimated compared: one standard model in which efficiency is assumed another explicitly incorporated into function. While results non-nested hypotheses tests inconclusive, with preferred to other for theoretical consistency. Incorporation has generally increased magnitudes statistical significance own price elasticities, substantially so case teff fertilizer. The indicate that farmers Ethiopia do respond positively significantly incentives. also underscore need improve farmer’s access better quality land, farm inputs credit, public investment roads irrigation.