The influence of technical inefficiency level that involve farmer’s behaviour on Risk towards profit in rice production of Indonesia

This paper analyses the influence of the level of technical inefficiency that occur in farmers on profits earned. Where the level of technical inefficiency consider that factor of managerial capabilities of farmers, one of which is a farmer's behaviour in dealing with the risks of farming. The aims of this research are to analyse the influence of the level of technical inefficiency on profits and perform simulations to determine the strategic policies that can be done by the government for an increase in profits of rice farmers. The methods used are the method of Translog Stochastic Profit Frontier and share of expenditure for inputs against profit. Primary data by panel collected during the rainy season and the dry season in 2014/2015 with the number of observations for 610 farmers. The research area covers 7 subdistricts in Malang Regency, East Java Province, Indonesia. The results showed that there is influence negatively the level of technical inefficiency and significant with a profit of 2.61. The best policy is the provision of a hand tractor to farmer group and efforts to reduce the level of technical inefficiency through increasing attitudes and behaviour of farmers in dealing with the risks of farming with the changes increase in profit of 29.12%.