The state of subsistence agriculture in Ethiopia: sources of output growth and agricultural inefficiency.

Abstract

Agriculture dominates the Ethiopian economy, accounting for about 50 percent of its GDP and 82 percent of its employment. However, the sector has always performed poorly; about one-half of the rural residents in Ethiopia live below the national poverty line, and the rural population is endowed with few and poorly provided social amenities. Sectoral-level data shows that the farmers in Ethiopia use little modern inputs and output per hectare is low. With rural population increasing at a fast pace, land holdings have been increasingly fragmented. Although fertilizer is the most widely used modern input, application rates are abysmally low, even by Sub-Sahara Africa standards. Use of improved seeds and pesticides is almost nonexistent. Among a group of other comparable countries (Sub-Saharan Africa, developing, the poorest five, and Ethiopia's neighboring countries) the Ethiopian agriculture performed the poorest. If Ethiopian farmers were to achieve the average yield levels reported in these comparable countries it would at least be self-sufficient in cereals production; other scenarios show output could grow substantially. Descriptive and comparative analysis conducted on the agroecologic zones included in 5 out of 6 Ethiopian Rural Household Surveys (ERHS) conducted between 1994 and 2004 shows that crop yields increased marginally while the area under cultivation expanded more rapidly. Moreover different zones tended to specialize in one or two crops. Household data indicates that subsistence farmers suffer from shortage of credit, have little exposure to modern production know-how, and most importantly suffer from shortage of rainfall that frequently turns to drought. In a country with ample water resources and where a large majority the population is engaged in rain-fed agriculture, which has become increasingly risky due to persistent drought, will be key to improving the lives of most Ethiopians. In addition to a descriptive and comparative analysis, this study used panel data from ERHS to statistically analyze the sources of output growth and technical efficiency in subsistence agriculture in Ethiopia. Assessing the sources of increased production, and examining the extent and sources of measured production inefficiencies can reveal options for ameliorating the bleak conditions confronting Ethiopian agriculture. A stochastic frontier analysis (SFA) was used to assess the variation in technical efficiency in addition to accounting for the sources of growth in agricultural output. There are indications that most of the increase in output in such subsistence agriculture was attained by increased use of traditional inputs, notably the amount of rainfall, the area and quality of cultivated land, and the numbers of oxen and hoes. By contrast, the rate of fertilizer application contributed the least for increase in output. However, participation in a nationally conceived extension program contributed significantly to output gains. Each agro-ecological zone included in the study gained from Hicks-neutral technological improvements during the study period. The average level of farming efficiency for the surveyed farmers across all the years was 0.4, indicating that most of the farmers were less than one-half as efficient as those producing on the frontier. Farm households' level of farming efficiency is improved by reducing labor bottlenecks and increased education. Households that have diversified risk from plots that are located sufficiently apart appear more efficient.