The Observed Heterogeneityin the Measurement of Cost Efficiency

Document Type : Research Article

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A number of studies estimated technical efficiency of agricultural production by using stochastic frontier production functions in Iran. But the uncontrollable factors are not attention to estimation production function. When the performances of firms are considered it might be some factors cause heterogeneity of firms and difference of firm efficiency. Most of these factors are not controllable by the producer, such as rainfall, soil type, diseases and other factors. In this study, the area under cotton cultivation in any province as the heterogeneity observed in the calculation of cost-efficiency is considered.  And the impact of heterogeneity on the efficiency of cotton production costs in each province was investigated by Using stochastic frontier cost function Pitt and Lee model and panel data. The results show that the normalized price of fertilizer and wage labor normalized has maximum impact on the cost of production per hectare of cotton in the country. So that everyone percent increases in the price of fertilizer and labor, 0.33 and 0.31 percent increase cost in hectare, respectively.  Kerman Province with 96 percent efficiency of cotton production in the country had the highest cost efficiency. Whereas Yazd province with 70 percent efficiency had the lowest cost efficiency. The area cultivation as the heterogeneity factor has not significant effects on cost efficiency. Correct and rational use of fertilizers and mechanization development appropriate to the circumstances of each province can play an important role in reducing the cost of production.

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