Production Efficiency in Peasant Agriculture: An Application of LISREL Model

The study examined a simplified conceptual model which incorporates variables that influence the processes and consequences of household decision-making in the Ada and Selale districts of the Ethiopian highlands. Linear structural relations (LISREL) analysis was performed on three conceptual models. The results of LISREL analysis indicate that the magnitude of contribution of factors to production efficiency in descending order as: skill variables (e.g., experience, secular education and production knowledge), consequences of access to resources or institutions (e.g., wealth), technologies adopted, physical factors (e.g., land and labour) and extension education. The impact of inputs on production efficiency was greater among farmers who have adopted one or two technologies (Ada) and two or more technologies (Selale). Successful adoption can be attained if, given appropriate socioeconomic environment, skills of producers are matched to the requirements of technologies, and when the choice of technologies are compatible with the goals of households, experience, region and enterprise specific comparative advantages.