Agrosearch (2014) Volume 14(2):179-190 http://dx.doi.org/10.4314/agrosh.v14i2.

PRODUCTION ELASTICITIES, RETURN TO SCALE AND ALLOCATIVE

EFFICIENCY IN YAM PRODUCTION IN EDO STATE, NIGERIA.
Izekor, O.B. and. 1Alufohai G.O
Department Of Agricultural Economics and Extension Services,
University Of Benin, Benin City, Edo State, Nigeria
Email: [email protected], [email protected]

ABSTRACT
The study estimated the production elasticities, the return to scale and analysed the allocative
efficiency of resources used in yam production in Edo State. A four-stage sampling process
involving simple random sampling was employed to select 180 yam farmers and a set of
questionnaire was used to collect data from the respondents. The Data collected were analysed
using stochastic frontier production function and marginal analysis. The result of the study
showed that none of the inputs used by the farmers was efficiently allocated and utilised. Land
(15.72), planting material (7.27) and fertilizer (2.38) were under-utilised, while labour (0.63) and
agrochemical (0.52) were over-utilised. This showed that there was the existence of disequilibria
in the allocation and utilisation of inputs by yam farmers in Edo State. Also, production elasticity
estimates indicated that the farmers’ production was in stage 1 (irrational stage) of the production
function indicating that there is room for expansion in output and productivity of yam farmers in
Edo State. This can be actualised by cropping higher hectarage of farm land with increased
quantity of planting material and controlled usage of higher quantities of fertilizer as these were
found to be under-utilised. A return to scale of 1.434 indicated increasing returns to scale.
Keywords: Allocative Efficiency, Elasticity of Production, Return to Scale, Yam.

INTRODUCTION
Yam constitutes the predominant starchy staple especially in sub-Saharan Africa where food
security for a growing population is a central issue (Fu et al., 2011). Although, Nigeria is the
largest yam producer in the world accounting for 65% of the global production in 2008 (FAO,
2010) yet there has been a decline in yam production in Nigeria over the years (IITA, 2002). The
area under cultivation and total yam output were also declining (IITA, 2002 and Ayanwuyiet al,
2011). Studies have shown that food crop farmers in Nigeria have low productivity because of
inefficiency in resource use (Idionget al, 2002). Production is the process of transforming inputs
such as capital, labour and land into goods and services called output. One of the major targets
of any society is the attainment of an optimal level of production with a given amount of effort.
This has been the focus of many individuals, private and government organisations worldwide
aiming at poverty alleviation, high productivity and food sufficiency, especially in developing
countries including Nigeria (Jacobi, 1998; Mougeot, 2000). Thus, any increase in the productivity

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of resources employed in the production enterprise would amount to progress. In view of this,
productivity gains in agricultural production (including yam production) are considered as a pre–
requisite for overall economic development (Mafimisebi and Adams, 2003). Efficiency analysis is
an issue of interest among economists in recent times. Optimisation can be obtained either by
minimising the cost of producing a given level of output or maximising the output attainable with a
given level of cost. Both optimisation problems require the proper allocation of input for the goal
to be achieved (Oluwatayo et al., 2008). Maximum resource productivity implies obtaining the
maximum possible output from the minimum possible set of input. In this context, optimal
productivity of resources involves an efficient utilisation of resources in the production process as
stated by Kyi and Oppen, (1998) and sited by Ezeaku et al (2013). To achieve economic optimum
output and thus profitability, resources have to be optimally and efficiently utilized. Though, yam
production in Edo State is a good source of income to the farmers, yet no records have shown it
to have attained optimal level which proper allocation of inputs can achieve. The question
therefore is whether yam farmers in Edo State are efficient in the allocation of the resources
employed in the production process; what could be the value of their marginal product of the
inputs? What are the production elasticities and the status of their input utilisation? Allocative
efficiency studies help farmers to determine the extent to which they can appropriately adjust
productive resources in order to achieve optimum productivity, therefore the need to carry out
such a study.
The objective of this study therefore was to ascertain the level of allocative efficiency of resource
use among yam farmers in Edo State with a view to facilitating investment decision making as
well as give an indication of optimal input utilisation necessary to obtain maximum return. The
specific objectives included the estimation of the value of marginal product, the production
elasticities, return to scale and the determination of the input utilization status and hence the
allocative efficiency.

RESEARCH METHODOLOGY
Study Area
The study was carried out in Edo State. The State lies approximately between longitude 06 0 04I E
and 060 43IE and latitude 050 44IN and 07034IN (NPC, 2006). It is bound in the south by Delta
State, in the west by Ondo State, in the north by Kogi State and in the east by Kogi and Anambra
States. It is important to note that Edo State is located in the yam producing belt of Nigeria
(NFRA, 2007) where the crop plays an important role in the social and religious festivals of the
people and it is viewed as an integral part of their heritage.
Sampling Procedure
A four stage sampling process was employed in selecting the samples needed for the study.
Firstly, the study area was stratified based on the Edo State Agricultural Development

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Programme delineation that is Edo South, Edo Central and Edo North agro - ecological zones, so
as to get a State wide coverage. The second stage involved the simple random selection of two
(2) wards which were the Local Government Areas (LGAs) from each of the agro ecological
zones. The selected wards were Orhiomwon and Uhunmwonde for Edo South agro-ecological
zone, Esan West and Esan South East for Edo Central agro-ecological zone, Owan East and
Estako West for Edo North agro- ecological zone. The third stage involved the random selection
of three villages from each ward, while the last stage involved a compilation of the list of yam
farmers in each village to serve as the sampling frame out of which ten (10) yam farmers were
selected using simple random sampling technique. The result of the above selection gave 30
respondents per ward, 60 respondents for each zone and 180 respondents State wide.
Data Collection
The primary data used in this study were collected with the use of a well-structured questionnaire
and interview schedule personally administered to the 180 respondents sampled for the study.
Analytical Technique
 Simple descriptive statistics such as percentage and frequency distribution were used to
describe the socio economic characteristics of the respondents.
 The Stochastic Frontier Production function (SFPF) using the Cobb –Douglas functional
form was used to determine the production function in this study. This functional form has
been used in other empirical studies (Emokaro and Erhabor, 2006; Agbajeet al., 2008;
Ojoet al., 2009; Okonet al., 2010; Shehuet al., 2010; Areeratet al., 2012; Ezehet al.,
2012and Mohammed et al., 2011)) to assess both technical and allocative efficiencies. The
SFPF estimates the regression coefficients that are used to calculate the marginal physical
product (MPP) for the estimation of the value of marginal product (VMP)
The production function model was explicitly specified in its linear form as:
=
1
Where, ln = Natural logarithm
Y = Quantity of yam produced (Kg)
X1 = Farm Size (Ha)
X2 = Planting Material (Yam Sett) (Kg)
X3 = Labour (Man days)
X4 = Quantity of Fertilizer used (Kg)
X5 = Quantity of Agro Chemicals used (Litres)
β0 - β5 = Parameters to be estimated (Regression coefficients)
εi= Composite error term defined as Vi – Ui

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Vi = Random variables which are assumed to be independent of U i, identical and

normally distributed with zero mean and constant variance N (0, Sv2).
Ui= Non – negative random variables which are assumed to account for the
technical inefficiency in production and are often assumed to be independent of V i such that
Ui is the non-negative truncated normal distribution.
 Marginal Analysis Efficiency of resource/ input used was determined by the ratio of the
Value of the Marginal Product (VMP)(which is MPPxPy) to Marginal Factor Cost (MFC).
The relationship (as indicated by Olayide and Heady (1982); Goniet al., (2007), Tambo and
Gbemu (2010) is given as:
= 2

The decision rule is that:

If r = 1, resource is efficiently utilised
r> 1, resource is under utilised
r< 1, resource is over utilised
where r = Efficiency coefficient
VMP = Value of Marginal Product which is the same as Marginal Value Product
(MVP)
MFC = Marginal Factor Cost
MFC = Px
Px = Unit price of input Xi

The marginal physical product (MPP) for each of the production inputs was estimated from
the regression coefficient of the SFPF and was used to determine the value of the marginal
product (VMP) as explained above.. According to Adesimi (1982) and Fasasi (2006) the
estimates with the widest application are those derived at the geometric mean of input,
especially with the Cobb Douglas production function. The value of the marginal product
(VMP) for this study as used by Fasasi (2006), Emokaro and Erhabor (2006), Tambo and
Gbemu (2010) was given as
= 3
Where,
MPP = Marginal Physical Product
Py = Unit Price of Output
=

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Where

b = Regression Coefficient
Xi = Geometric mean of input Xi
Y = Geometric mean of Output

The elasticity of production which is the degree of responsiveness of the output to a unit change
in input used was computed using the Cobb Douglas function. The coefficients of the
independent variable (Xi) of the Cobb Douglas function were the direct elasticities of production.
The value of the elasticity indicated whether each additional input used results in constant
(Ep=1), increasing (Ep>1) or decreasing (Ep<1) productivity. The sum of the individual elasticities
gave the rate of return to production and indicates the stage of production (that is whether stage
1, 2 or 3) where the respondent is operating (Olukosi and Ogungbile1989).
 Likert scale was used to determine the level of seriousness of the various constraints of
the yam farmers. The responses to the various constraints were scored such that the most
serious constraint was assigned the highest score as shown below:
Very serious = 5 Serious = 4 Moderately serious = 3
Least serious = 2 Not serious =1
The Mean Item Score (MIS) was calculated and the constraint with MIS between 3.0
and5.0 was considered to be significant while those with MIS < 3.0 were assessed as not
relevant.

RESULTS AND DISCUSSION

Socio-economic Characteristics of Respondents
Table 1 shows the socio-economic characteristics of yam farmers in Edo State. More males
(83.33%) were involved in yam farming than females (16.67%). This result was similar to that of
Agbajeet al., (2008) who note that yam farmers were mostly males in Ondo State. Majority of the
respondents were married (87.22%), while the others were either single (0.56%), separated
(8.89%) or divorced (3.33%). The result further showed that the farmers were fairly educated with
about 45.56% of the respondents having secondary school education and 35.56% had primary
school education. The average age of yam farmers in Edo State was 51 years which showed that
yam farmers in the study area were relatively old. This finding corroborated that of Ajibefun and
Abdulkadiri (1999), stating that small scale farmers in Nigeria were old and ageing. It further
corroborated the finding of Pius and Odjuvwuedrhie (2006) that concluded that yam farmers in
south-eastern Nigeria were relatively old, with a mean age of 43years. They had an average
household size of six persons, indicating that yam farmers in the study area had relatively low
household size. This finding has implications for labour source, productivity and efficiency of yam

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production, as most of the farmers were likely to depend more on hired labour for the yam
production activities. These findings are closely supported by those of Ekunweet al., (2008) who
indicate that yam farmers in Delta and Kogi States had an average of seven and nine persons
per family respectively. The yam farmers in the study area were relatively experienced with an
average farming experience of fifteen years, implying a reasonable level of specialization and
expertise in yam production. This compared favourably with the findings of Oluwatusin (2011)
that indicate a farming experience of 14 years for yam farmers in Osun State.

Table 1. The Socio-Economic Characteristics of Respondents

Characteristics Frequency Percentage Mean

Sex
Male 150 83.33
Female 30 16.67

Marital Status
Single 1 0.56
Married 157 87.22
Separated 16 8.89
Divorced 6 3.33

Educational Level
No Formal Education 28 15.56
Primary 64 35.56
Secondary 82 45.56
Tertiary 6 3.33

Age
30 – 39 13 7.22
40 – 49 59 32.78 51
50 – 59 99 55.00
≥ 60 9 5.00

Household Size 82
≤5 65 45.56
6–8 27 36.11 6
9 – 12 6 15.00
>12 13.00

Farming Experience 6
˂5 55 3.33
5– 10 52 30.56 15
11 – 15 30 28.89
16 – 20 10 16.67
21 – 25 27 5.56
>25 15.00

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Allocative Efficiency levels of Inputs Used in Yam Production

The estimated results of the ordinary least squares (OLS) and the maximum likelihood estimates
(MLE) of the production function for yam farmers in Edo State are presented in Table 2. The
sigma square value of 2.910 indicated a good fit and the correctness of the specified
distributional assumption of the error term. The gamma estimate of 0.9910 indicated that 99.10%
variation of the output of yam in Edo State was due to the inefficiency factors. The ratio of the log
likelihood function when compared to the joint effect of efficiency on output was 31.614. This
diagnostics statistics confirmed the significance of the stochastic frontier production function
(SFPF). This compared favourably with the findings of Pius and Odjuvwederhie (2006) who report
that the average response function is not an adequate representation for yam production in south
eastern Nigeria and Ojoet al., (2009) who concluded that the OLS is not an adequate
representation for yam production in Niger State.
The allocative efficiency level of inputs used in yam production was presented in Table 3. The
results indicated that farmland (15.72), planting material (7.27) and fertilizer (2.38) were
underutilized. This implies that yam farmers could increase their output and profit by increasing
these resources. This finding was in consonance with that of Fasasi (2006), Sanusi and Salimonu
(2006), Olorunsanyaet al., (2009), with results showing under utilisation of land input by yam
farmers in Ondo, Oyo and Ekiti States respectively. These values were more than unity
confirming the existence of disequilibria. This result supported the findings of Ekunweet al.,
(2008) who reported the under utilisation of planting materials (yam sett) by farmers in Delta and
Kogi States and Fasasi (2006), for farmers in Ondo State.
Labour and agrochemicals were over utilised with efficiency ratios of 0.62 and 0.52 respectively.
On the whole, these results imply that none of the inputs were being efficiently utilized by yam
farmers in Edo State since it was either over utilised or under- utilised.

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Table 2. The Ordinary Least Square (OLS) and Maximum Likelihood (MLE) Function for Yam Production
Variable Parameter OLS MLE
Function Function

Constant b0 4.564 1.363

(2.451) (1.754)
Farm land (Ha) b1 0.783 0.495
(2.306)* (3.599)**
Yam sett (kg) b2 0.478 0.540
(3.528)** (8.254)**
Labour (Man day) b3 0.061 0.367
(0.390) (6.698)**
Fertilizer (kg) b4 0.056 0.040
(1.141) (2.221)*
Agro chemical (litres) b5 0.057 0.008
(0.492) (0.193)
Sigma square σs2 2.910
(8.517)**
Gamma ᵞ 0.990
(120.175)**
Log likelihood ratio 31.614
Figures in parentheses are t-ratios, ** Significant at 1% level of significance
* Significant at 5% level of significance

Table 3. Allocative Efficiency Levels of Inputs Used in Yam Production

INPUT MPV MFC RATIO INFERENCE

Farm Land Under-utilised

60871.02 3871.43 15.72
Yam sett Under-utilised
324.36 44.62 7.27
Labour Over-utilised
485.55 766.67 0.63
Fertilizer Under-utilised
150.66 63.30 2.38
Agro Chemical Over-utilised
900.63 1732.59 0.52

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Elasticity of Production and Return to Scale

The estimated coefficients of the regression model were also elasticities of production, presented
in table 4. The result showed that elasticities for farm size, yam sett, labour and fertilizer were
0.495, 0.540, 0.367 and 0.040. The elasticities less than unity were estimated to be positive
decreasing functions indicating that the allocation and utilisation of the variables were in stage of
economic relevance of the production function (Stage II). The elasticity for agro-chemical (-0.008)
less than zero showed a negative decreasing function to the factors, indicating the over-utilization
of the input implying that its allocation and utilisation were in irrational stage of production (stage
III) of the production process.
The return to scale was 1.434, which was an indication that on the whole, yam production in the
study area was in stage 1 implying that inputs were under-utilized by the yam farmers. This
suggested that yam farmers could benefit from the economies of scale linked to increasing
returns. At this stage of irrational production (stage 1), production could be increased by using
more of the production resources. This result was in consonance with the findings of Ojoet al.,
(2009), that yam farmers in Ondo State operated in the irrational stage (stage 1) of the production
function with a return to scale of 1.269 and Oluwatusin (2011) that concluded that yam production
in Osun State was in the irrational stage (stage 1) with return to scale of 1.119.

Table 4. The Elasticities of Production and Return to Scale

Variable Production Elasticities

Farm Size 0.495

0.540
Yam sett
0.367
Labour
0.040
Fertilizer

Agro chemical -0.008

Return to Scale 1.434

The Production Constraints of Yam Farmers

The constraints faced by yam farmers in the study area were presented in table 5. The major
constraints identified to confront yam farmers in the study area were high cost of acquiring land
(X =4.86), inadequate capital (X =4.28), high cost of labour (X =4.24), difficulty in acquiring land
(X = 3.96) and difficulty in accessing quality planting materials (X = 3.84). The others also
identified included transportation problems (X = 2.73), pest and disease attack (X = 2.36) and

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high cost of fertilizer and agro chemicals (X = 2.30). This result compares favourably with the
findings of Sanusi and Salimonu (2006), that inadequate capital to invest in yam production,
scarcity of labour and storage problems were major problems facing yam production in Oyo
State.

Table 5. The Production Constraints of Yam Farmers

Constraints Mean (Ẋ)
High Cost of acquiring land 4.86

Inadequate capital 4.28

High cost of labour 4.24

Difficulty in acquiring land 3.96

Difficulty in accessing quality Planting materials 3.84

Transportation problems 2.73

Pest and Disease attack 2.36

High cost of fertilizer and agro chemicals 2.30

CONCLUSION
The study showed that yam farmers in Edo State were not efficient in the use of production
resources, while farmland, planting materials (yam sett) and fertilizer were under-utilized, labour
and agrochemical were over-utilized. This showed that none of the production inputs was
optimally allocated and utilised. The overall productivity of yam was however in the irrational
stage of production (stage I) suggesting that there was room for expansion in output and
productivity. This can be actualised by cropping higher hectarage of farmland with increased
quantity of planting material and controlled usage of higher quantity of fertilizer as these were
found to be under-utilised. Since the under-utilsation of some of the resources may not be
unconnected with inadequate capital, the yam farmers should be given assistance in form of
loans or organise themselves into cooperatives to curb the problem of inadequate finance and
also afford the high cost of inputs especially labour and land as these were their major
constraints.

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