Technical Efficiency in Bangladesh Rice Production: Are There Threshold Effects in Farm Size?

This study analyzes the impact of farm size on productivity for rice producers in Bangladesh with a particular focus on a threshold effect of farm size. Using rich survey data for 960 rice farm households spread over 64 villages collected in 2008, total factor productivity measures for both Aman and Boro seasons are estimated using Data Envelopment Analysis. The estimates of productivity scores are further regressed on farm specific variables using Hansen’s (1996, 1999) threshold estimation procedures. The estimation results of a linear threshold technical efficiency equation confirm that 1) there are two thresholds that pertain the 960 Boro farm households into three possible categories and one threshold for the 465 Aman farm households, 2) farm size and productivity are positively related, with the exception of farms that hold more than 1 ha for the Boro season, and 3) factors that affect the rice productivity vary across farm size categories. Among the small farms (below 0.33~0.35 ha), the larger their farm size, the higher their productivity. Land fragmentation has an adverse effect on improving productivity, except for the large farms (above 1 ha). Policy adjustments related to land reform, aiming at small farms, would have the potential to increase rice production, as well as to fulfill their needs to sustain livelihood in Bangladesh.