Journal of Global Economics, Management and Business Research

PRODUCTION EFFICIENCY OF SMALL-SCALE SHALLOT PRODUCERS IN EAST JAVA, INDONESIA

SUJARWO .

Department of Agricultural Economics and Agribusiness, University of Brawijaya, Malang, Indonesia.

MICHAEL REED *

Department of Agricultural Economics, University of Kentucky, USA.

SAYED SAGHAIAN

Department of Agricultural Economics, University of Kentucky, USA.

*Author to whom correspondence should be addressed.

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Abstract

This study attempts to find ways for small-scale farmers to increase efficiency with their current technology for shallots. The efficiency measurements rely on a double-log production function, which is estimated by Principal Component Regression (PCR) to remove multicollinearity from the model. The results confirm that small-scale shallot farmers have difficulty in allocating their inputs efficiently. Land, seed, and labor are over-utilized; while fertilizer and pesticide are under-utilized. Small-scale shallot farmers have estimated gross profit losses of 32% due to inefficient allocation of inputs.

Keywords: Production function, efficient allocation of inputs, profit gap

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