Estimate the technical efficiency and identify influencing factors of tea farmers in thai nguyen city

THAI NGUYEN UNIVERSITY UNIVERSITY OF AGRICULTURAL AND FORESTRY PHAM HA LUONG ESTIMATE THE TECHNICAL EFFICIENCY AND IDENTIFY INFLUENCING FACTORS OF TEA FARMERS IN THAI NGUYEN CITY BACHELOR THESIS Study Mode: Full-time Major: Agricultural Economics Faculty: Advanced Education Program Office Batch: 2017-2021 Thai Nguyen, 27/11/2021 i DOCUMENTATION PAGE WITH ABSTRACT Thai Nguyen University of Agriculture and Forest Degree Program Bachelor of Agricultural Economics Student name Pham Ha Luong Student ID DTN1754110010 Thesis Title Estimate the technical efficiency and identify influencing factors of tea farmers in Thai Nguyen city Supervisor Ph.D Ho Van Bac Supervisor’s Signature Abstract: This study aims to estimate the technical efficiency levels and determine the factors correlated with the technical efficiency in tea-planting households in Thai Nguyen City of Vietnam To begin with, the output-oriented Data Envelopment Analysis method is employed to estimate the technical efficiency of the 90 households, residing in Tan Cuong, Phuc Xuan, and Phuc Triu in the year 2020 by using five input and one output variables According to the estimation results, the mean of technical efficiency under constant returns to scale, technical efficiency under variable returns to scale, and scale efficiency are 81.4%, 85.0%, and 95.7% respectively These figures reveal that the average sample tea-growing households may boost production by a certain amount by modifying the allocation of inputs more rationally Tobit regression is applied in the second stage to examine the influences of determinants factors on estimated technical efficiency The empirical findings of the study imply that the ethnic, irrigation, organic standard, gender, extension service, and co-operatives participant have a substantial impact on the technical efficiency of tea-planting households in three communes of Thai Nguyen city Keywords Technical Efficiency, Data envelopment Analysis, Tea Planting, Thai Nguyen Number of pages 44 Date of Submission i ACKNOWLEDGEMENT First and foremost, I would like to extend my sincerest thanks to my supervisor Dr Ho Van Bac, Faculty of Economics and Rural Development, Thai Nguyen University of Agriculture and Forestry Without his enthusiastic support, dedicated advice and continuous incentives, this work would hardly have been accomplished I would like to convey my appreciation to the staff in the Thai Nguyen City Statistical Office Their guidance and assistance in the data collection stage paved the solid way for conducting this study Finally yet importantly, I would like to express my heartfelt gratitude to my beloved family and my affectionate friends for believing in me You all are an intense motivation for any journey in my life ii TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES LIST OF ABBREVIATIONS PART I INTRODUCTION 1.1 Research rationale 1.2 Research’s objectives 1.3 Research questions 1.3.1 Research subjects 1.3.2 Research scope 1.3.3 Research limitation PART II LITERATURE REVIEW 2.1 Concept of efficiency 2.1.1 Technical efficiency 2.1.2 Allocative efficiency 10 2.1.3 Scale efficiency 10 2.2 Evaluation of efficiency 10 2.3 Identifying the factor affecting the technical efficiency 12 2.4 Review of studies related to technical efficiency in Vietnam 13 iii PART III METHODOLOGY 17 3.1 Description of the study area 17 3.2 Sampling and data collection 19 3.2.1 Sample size and sampling techniques 19 3.2.2 Data sources and method of data collection 19 3.3 Data analysis 20 3.4 Definition and measurement of variables 20 PART IV RESULTS AND DISCUSSION 22 4.1 Tea production in Thai Nguyen City 22 4.2 The reality of tea production in the studied area 24 4.2.1 The productive efficiency 24 4.2.2 Description statistic result 26 4.2.3 Distribution of technical efficiency 29 4.2.4 Factors affecting the technical efficiency 32 CONCLUSION 36 REFERENCES 37 APPENDICES 43 iv LIST OF FIGURES Figure Location map of study area 17 Figure The total tea planted area and production in Thai Nguyen City 2013-2020 22 Figure Total tea planted area by communes in Thai Nguyen City in 2020 23 Figure Population and area of three study communes in 2020 24 Figure Distribution of technical efficiency level under variable returns to scale 29 Figure Distribution of technical efficiency level under constant returns to scale 30 Figure Distribution of scale efficiency level 30 LIST OF TABLES Table Description of variables used 21 Table Number of households and tea-planting households in three communes 23 Table The total revenue, total cost and profit 25 Table Summary statistics of tea-planting households 26 Table Efficiency score summary statistics 28 Table Returns to scale summary statistics 31 Table Factors influencing technical efficiency 32 LIST OF ABBREVIATIONS BCC Banker Charnes Cooper CCR Charnes Cooper Rhodes CRS Constant returns to scale DEA Data Envelopment Analysis DRS Decreasing returns to scale GSO General Statistics Office IRS Increasing returns to scale OLS Ordinary Least Square SE Scale efficiency SFA Stochastic Frontier Analysis TE Technical efficiency TNSB Thai Nguyen Statistical Yearbook VietGAP Vietnamese Good Agricultural Practices VND Vietnamese Dong VRS Variable returns to scale PART I INTRODUCTION 1.1 Research rationale Tea has been regarded as one of the emphasized traditional cultures in Vietnam for centuries (Yanling & Montira, 2019) The elderly have a habit of consuming tea as a regular drink and serving green tea to their beloved guests, whereas a cup of hot tea is an indispensable beverage for the blue-collar labor force every early morning Nowadays, tea is processed into a variety of goods and products, which makes tea accessible to everyone regardless of their age group, educational level or social status For many centuries, tea has been a product of daily consumption for many consumers, irrespective of location (Wenner, 2011) To fulfill the colossal demand for tea, Vietnam spends 123,000 on tea cultivation, with a production of 1019.9 thousand tons in 2019, according to the Annual statistical report of the Vietnam General Statistics Office (GSO, 2019) Vietnam is the fifth largest tea exporter in the world, and has plenty of tea-growing regions The most popular ones are concentrated in the Northern provinces such as Thai Nguyen, Tuyen Quang, Son La and Lai Chau and in central highlands like Lam Dong Based on the Thai Nguyen Statistical Yearbook in 2019, Thai Nguyen has the biggest cultivated land for tea in Viet Nam with 22,282 planted tea, of which 1545 hectares belongs to Thai Nguyen City Located in the west corner of Thai Nguyen city, Tan Cuong commune, Phuc Xuan commune and Phuc Triu commune have a large proportion of tea growing and processing farmers The daily life and income of the local people are highly dependent on tea However, the productivity of tea production amongst tea farmers is heterogeneous, partly due to the techniques using inputs Therefore, the local farmers have to sit down under precarious living and face tremendous difficulties Starting from that reality, I conducted this research to estimate the technical efficiency of tea-planting households and identify the factors affecting the technical efficiency in the current time to find out advice to help people reduce input costs and improve labor productivity in order to achieve the ultimate goal of profit maximization 1.2 Research’s objectives In general, estimation the technical efficiency and analyzing the factors influencing the tea process is to give suggestions of improving the efficiency and productivity amongst tea-growing households in the Thai Nguyen City Specifically, conducting this research is to pursue the following targets: − To overview the status of tea production in the study area; − To estimate the level of technical efficiency of tea-planting households and the average technical efficiency; − To identify the factors that influence technical efficiency in tea production 1.3 Research questions 1.3.1 Research subjects The coverage area is limited to three communes, namely Tan Cuong, Phuc Xuan and Phuc Triu in Thai Nguyen City Households in the study area produce many types of crops such as paddy rice, maize and cassava However, tea is the dominant crop in the known yield in the study area Therefore, this study focuses solely on tea production in terms of technical efficiency Due to the limitation of capacity, budget and duration, the study conducts a case study of 90 households in three abovementioned communes total surveyed tea-planting households are working at the technical efficiency level of over 60% However, almost half of total sample households scored above the mean of technical efficiency under constant returns to scale score of 81.4% The majority of teaplanting households are operating at the medium level of 70-90% and at the maximum level of technical efficiency, with the former occupying 27.8% and the latter comprising 24.4% 27.8 Tea-planting household (%) 30 25 24.4 20 16.7 15 11.1 12.2 7.8 10 100 99-90 89-80 79-70 69-60 TECRS score Ranges Below 60 Figure Distribution of technical efficiency level under constant returns to scale Tea-planting household (%) 70 58.9 60 50 40 30.0 30 20 6.7 10 3.3 1.1 0.0 79-70 69-60 Below 60 100 99-90 89-80 Scale Efficiency Score Rangers Figure Distribution of scale efficiency level 30 The frequency distribution of scale efficiency scores is displayed in Figure 7, of which, about 30% of the total tea-growing households achieved the optimal scale operation A heavy skewd in the range of 90 to 100%, representing more than half of sample households A mere proportion of 11.1% of the total number of sampled households, wholse scale efficiency score is less than 90% Table Returns to scale summary statistics Scale Classification Number Percent CRS 27 30.0 IRS 14 15.6 DRS 49 54.4 TOTAL 90 100 (Source: Own estimates, 2021) Table lists the number and the percentages of households, which have constant returns to scale (CRS), increasing returns to scale (IRS), and decreasing returns to scale (DRS) Only 27 households are operating with constant returns to scale, occupied 30% of the total tea-planting households More than half of sampled households are cultivating under the decreasing returns to scale That reveals that expanding the scale of cultivation may not be an appropriate solution to gain the scale efficiency for tea-growing households in this case However, it should be noted that the sampled households were relatively small size Enlarging the scale may be a feasible way to improve the level of scale efficiency for the large-scale farms 31 4.2.4 Factors affecting the technical efficiency The second stage of this study is to investigate the households’ characteristics influencing their technical efficiency level under the variable returns to scale and constant returns to scale, which is encapsulated in Table The sign of the variables in the Tobit model plays an indispensable role in explaining the observed level of technical efficiency of the tea-planting households A positive sign on the coefficient (Coef.) implies that the variables tend to increase the technical efficiency, while the negative sign on the coefficient suggests a reduction of technical efficiency Table Factors influencing technical efficiency Variable Coef P>|t| TEVRS TECRS TEVRS TECRS Gender 0.114 0.108 0.049** 0.049** Ethnic 0.157 0.134 0.008*** 0.013** Education level 0.013 0.008 0.170 0.347 Co-operative participant 0.117 0.065 0.093* 0.299 VGAP standard -0.082 -0.087 0.200 0.152 Organic standard 0.130 0.115 0.043** 0.058* Extension service 0.089 0.045 0.078* 0.340 Access credit -0.059 -0.030 0.474 0.703 Irrigation system 0.109 0.082 0.051* 0.115 (Source: Own estimates, 2021) Note: ***, ** and * indicate statistical significance of the 1%, 5% and 10% respectively Gender of the household head is positively related to their output-oriented technical efficiency under variables as well as constant returns to scale A positive sign at the significant level of 5% indicates that male-headed households have more likely to 32 improve the output than their female counterparts are Women usually take responsibility as the primary caregiver who does household chores, and looks after children, thereby, wasting opportunities of training attendance and credit access In tea cultivation, the female workforce tends to some plain works, such as taking care of crops and harvesting instead of purchasing inputs or spraying pesticides as men did Ethnicity had a statistically significant positive impact on technical efficiency This suggests that Kinh households could cultivate tea with higher technical efficiency than other ethnic households, particularly those of Nung, Tay, and San Diu in this study area Kinh households often have higher education and experience levels Conversely, minority ethnic people cultivate based on personal experiences and backward techniques, therefore their technical efficiency is normally lower than that of Kinh people The 1% level of confidence under variable returns to scale and 5% with assumption of constant returns to scale emphasized the considerable impact of ethnicity on technical efficiency and the distinct difference in technical efficiency scores between Kinh households and others Co-operative membership has a beneficial impact on the technical efficiency level of tea-planting households at the significant level of 10% The figure and its sign revealed that tea-growing households that belong to any co-operatives were more efficient Participating in co-operatives offers them a chance for technical assistance and information sharing, which, in turn, influences their decision-making process in their farms The more closely connected the co-operative participants are, the more support they can utilize 33 The organic standard is a significant factor affecting technical efficiency at the level of 5% and 10% under variable and constant returns to scale assumption respectively In the study area, farmers are converting tea cultivation from conventional farming to the organic farming method in order to meet the organic standard Applying organic standard not only helps to improve the product quality and food safety and hygiene, but also strengthens professional tea-growing techniques and methods for households in order to achieve a higher level of technical efficiency A significant positive effect on technical efficiency at 10% level of extension, implying that accessing extension services can help tea-cultivating households increase output In order to achieve the goal of sustainable agriculture according to the national action plan, the Vietnamese government has provided many extension services to farmers such as training courses on cultivation, harvesting and conservation, technology instruction, fertilizer and pesticide application, and ensuring market The extension service is an indispensable tool to impart scientific knowledge and educate farmers Therefore, households who receive agricultural extension services and practice creatively become more efficient Irrigation plays a special role in boosting the technical efficiency score The positive figure at the significance of 10% levels suggests that households with proactive irrigation have more potential to expand their output than those dependent on the weather According to the responses of tea farmer, frost, draught and severe weather may destroy the tealeaves and the tea quality, thereby damaging to the overall yield of the crop 34 As can be seen in Table 7, educational level, VietGAP standard and access to credit have no effect on both technical efficiency under variable returns to scale and technical efficiency under constant returns to scale in this censored regression model Regarding education, the elderly with lower educational levels often cultivate tea based on their own experiences accumulated from ancestors, whilst people with more education are often more flexible in applying technological advances to farming Therefore, educational attainment measured by 12 normal grades did not show the effect on technical efficiency in study area The Vietnamese GAP standard, meanwhile, has been applied recently in a small scale, and uncompleted way in the three study communes, so the difference has not been seen in effectiveness compared to households that not follow this standard Generally, credit access may have a positive impact on the technical efficiency of crops cultivation, but in this study area, it is the converse The reason is that most of the respondents said they did not have a demand for formal credit due to their small scale of cultivation and production If households borrow money from banks and financial institutions, they often use the loan for different purposes, not in tea cultivation Since households still have to pay an interest rate on the loan for nonagricultural purposes, it sometimes affects the tea cultivation and the level of technical efficiency Hence, a negative sign is found in this model 35 CONCLUSION This study set out to measure the technical efficiency level of tea-planting households and identify factors correlated with the technical efficiency in Phuc Xuan, Phuc Triu, and Tan Cuong commune, Thai Nguyen City Direct interviews with 90 sample tea-planting households were conducted using a questionnaire that includes questions about household characteristics, farm characteristics, production characteristics, inputs, and output characteristics The respondents provided information on tea cultivation and production in the cropping year 2020 The Data Envelopment Analysis was used to estimate the technical efficiency level by taking input variables like fresh tealeaves output, farm size, family labor, fertilizer, pesticide and others In the second stage, the influencing factors were revealed via the result of the Tobit regression function Results showed that the mean 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development, Independent Study Project https://digitalcollections.sit.edu/isp_collection/1159 42 (ISP) Collection 1159 APPENDICES Appendix 1: Questionnaire PHIẾU THU THẬP THƠNG TIN TÌNH HÌNH SẢN XUẤT CHÈ CỦA HỘ GIA ĐÌNH Ngày vấn: Mã số: Địa chỉ: xã huyện tỉnh I THƠNG TIN CHUNG VỀ HỘ GIA ĐÌNH Tên chủ hộ: Số điện thoại Giới tính: 1-nam; 0-nữ Tuổi: Dân tộc: Trình độ giáo dục: Nghề nghiệp chủ hộ (1-thuần nông; 2-nghề khác): Loại hộ (tiêu chí địa phương): 1-hộ nghèo; 2-hộ cận nghèo; 3-hộ trung bình; 4-hộ khá/giàu Nhân (tính số người thường trú) Tổng số…… người/hộ; Trong độ tuổi lao động……… người; Lao động nơng nghiệp…… người; Lao động phi nơng nghiệp………người Diện tích đất đai Tổng diện tích đất thổ cư: m2 Tổng diện tích đất trồng chè: m2 II THƠNG TIN CHUNG VỀ MƠ HÌNH SẢN XUẤT Hộ gia đình có thành viên Hợp tác xã khơng? Có Khơng Tên Hợp tác xã (nếu có): Hộ gia đình có sản xuất chè theo tiêu chuẩn VietGAP khơng? Có Khơng Hộ gia đình có sản xuất chè theo hướng hữu khơng? Có Khơng Hộ gia đình có hệ thống nước tưới tiêu chủ động khơng? Có Khơng Hộ gia đình có tiếp cận dịch vụ khuyến nơng địa bàn khơng? Có Khơng Hộ gia đình có vay tín dụng để sản xuất nơng nghiệp khơng? Có Khơng 43 III KẾT QUẢ SẢN XUẤT CHÈ CỦA HỘ NĂM 2020 STT Sản phẩm Tuổi (Chè tươi) (năm) Tổng diện Tổng sản tích lượng (m2) (kg) Giá bán (nghìn đồng) Tổng giá trị (nghìn đồng/năm) IV CHI PHÍ SẢN XUẤT CHÈ CỦA HỘ GIA ĐÌNH NĂM 2020 Chi phí lao động/năm Cơng việc Số lao động Số lao động Số ngày gia đình thuê ngồi cơng Giá th Thành tiền Làm đất, trồng Chăm sóc (tưới, bón phân) Thu hoạch, vận chuyển Chế biến Khác:……………… Chi phí phân bón/năm Loại chè Hữu NPK Nước tưới ……… ……… (kg x giá) (kg x giá) (m3 x giá) (kg x giá) (kg x giá) Tổng Chi phí khác/năm Loại Số lượng Giá thành Thuốc trừ sâu, diệt nấm Bao bì, đóng gói Củi đốt Bảo trì máy móc 44 Tổng tiền Ghi