Analyzing technical inefficiency and production risk in aquaculture-The stochastic frontier production function with double heteroskedasticity

This paper adopts the stochastic frontier production function with double heteroskedasticity to analyze technical inefficiency and production risk of intensive white-leg shrimp farming in Ninh Thuan, Vietnam. The result shows that feed is a risk-increasing input, while chemicals/drugs and electricity are risk-reducing inputs. This implies that an average risk-averse farmer will use less feed and more chemicals/drugs and electricity than a risk-neutral farmer from the study area. However, the results reveal that technical inefficiency is negatively related to feed and chemicals/drugs, and positively related to electricity, farm size, and labor. Moreover, the output elasticity of feed is highest among the inputs in the production mean function. In addition, the statistically negative influences on technical inefficiency in this type of farming are technical training and access to formal credit. Policies on the management of chemicals/drugs and technical training for their use in aquaculture practice should be the focus for Vietnam's intensive white-leg shrimp farming.