Effects of farm size and greenleaf marketing arrangements on smallholder tea production efficiency in selected counties in Kenya
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Date
2018
Authors
Ateka, Josiah Mwangi
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The smallholder tea sub-sector makes an important contribution in the Kenyan
economy. Although the subsector has enjoyed relative growth in terms of acreage,
output and number of growers, productivity has remained low. The subsector is
characterized by huge differentials between actual and potential yields, which
imply existence of production inefficiencies. Studies on efficiency in the sector
have focused on the regional differences in efficiency, but have not explicitly
considered the effects of farm size on efficiency; despite rising concerns from
stakeholders about subdivision of tea farms. Moreover, the influences of the
alternative tea market channels (ATMCs) which are outcome of the tea market
reforms have also not been accounted for in previous studies. This study estimated
the level of technical efficiency (TE) and analysed the effects of farm size and
marketing arrangements on efficiency in the smallholder tea subsector in Kenya.
Using the multistage random sampling approach, data for the study was collected
from a cross sectional survey of 525 tea farming households. The level of TE was
estimated using the variable returns to scale DEA model, while the analysis of
farm size effects was explored using the Fractional Regression (FR) model which
accounts for the fractional nature of efficiency scores. The study further applied
the Endogenous Switching Regression (ESR) and Propensity Score Matching
(PSM) model to investigate the effect of marketing arrangements on TE. The study
found that smallholder tea farms were technically inefficient and were operating
below their optimal scale. The estimated mean of TE was 0.46 which implies that
tea farmers can achieve their current tea output using only 46 percent of their
inputs. The study further found that tea farmers in Nyamira County were
technically less efficient than their counterparts in Bomet County. The effect of
farm size on TE was found to be nonlinear with TE first falling and then rising
with increase in farm size. Apart from contributing to literature on the relationship
between farm size and efficiency, the study demonstrates that there exists a
threshold of farm size (3.93 acres) beyond which increase in farm size leads to an
increase TE. The other factors that were found to influence TE were participation
in the Farmer Field School (FFS) extension program, the share of family labour
applied in tea farming, the age of the farm and the education level of the household
head. With regard to tea marketing, it was found that the ATMCs were used by
36.4 percent of the smallholders in the study area. From the ESR and PSM models
the study found a consistent result that ATMC participation increases TE in tea
production. The study recommends that Agriculture and Food Authority (AFA)
and the respective county governments enact regulations that restrict farm
subdivisions and implement policies that encourage consolidation of tea farms,
support tea replanting to replace aging tea gardens and deepen market reforms in
order to increase the farmers‟ access to ATMC. In addition, efforts should be
directed towards promotion of the FFS extension, addressing labour market
imperfections and ensuring that the policy formulation process in the tea sector
accounts for regional specific heterogeneities that may impact on efficiency.
Description
A thesis submitted to the school of economics in partial fulfillment of the requirements for the
award of the degree of doctor of philosophy in economics of Kenyatta University July, 2018