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Technical Efficiency In Agricultural Production And Access To Credit In West Bengal, India: A Stochastic Frontier Approach

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Abstract

Access to credit significantly influences land leasing decisions, and thus ultimately has a significant implication on ensuring efficiency in agricultural production. This paper attempts to examine the instrumental role of credit in ensuring efficiency in the context of West Bengal agriculture by disaggregating the analysis for two mutually exclusive groups: bank customers and non-bank customers. Empirical analysis based on Stochastic Frontier Analysis confirms that farming households having access to formal credit are, in general, practicing cultivation more efficiently by channelizing credit in the utilization of agricultural inputs. In addition, contractual arrangements and operated farm size are found to be significant determinants of observed variation of technical efficiency estimates in case of bank customers. In the context of higher probability of access to credit in case of fixed rent tenants and large farmers, it can be argued that farmers having access to credit achieved a higher efficiency level by adopting the improved technology in agricultural production. Thus an access to institutional credit would provide an incentive to the farmers to adjust the operational land by the mechanism of tenurial contract so as to bring about efficiency in agricultural production.

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  • Laha, Arindam, 2013. "Technical Efficiency In Agricultural Production And Access To Credit In West Bengal, India: A Stochastic Frontier Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1(2), pages 1-12, October.
    • Handle: RePEc:ags:ijfaec:160094
    DOI: 10.22004/ag.econ.160094
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    1. Taylor, Timothy G. & Scott Shonkwiler, J., 1986. "Alternative stochastic specifications of the frontier production function in the analysis of agricultural credit programs and technical efficiency," Journal of Development Economics, Elsevier, vol. 21(1), pages 149-160, April.
    2. Laha, Arindam & Kuri, Pravat Kumar, 2010. "Rural Credit Market and the Choice of Tenurial Contracts: A Micro Evidence from Rural West Bengal, India," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 33(4), pages 63-83, December.
    3. Sarker, Debnarayan & De, Sudpita, 2004. "High Technical Efficiency of Farms in Two Different Agricultural Lands: A Study under Deterministic Production Frontier Approach," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 59(2), pages 1-12.
    4. Timothy G. Taylor & H. Evan Drummond & Aloisio T. Gomes, 1986. "Agricultural Credit Programs and Production Efficiency: An Analysis of Traditional Farming in Southeastern Minas Gerais, Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 110-119.
    5. Coelli, Tim J. & Battese, George E., 1996. "Identification Of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(2), pages 1-26, August.
    6. Eswaran, Mukesh & Kotwal, Ashok, 1986. "Access to Capital and Agrarian Production Organisation," Economic Journal, Royal Economic Society, vol. 96(382), pages 482-498, June.
    7. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
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