Does farm size matter? Investigating scale efficiency of peasant rice farmers in northern Ghana

The study assessed the technical and scale efficiency of small-scale rice producers in northern Ghana as well as the effect of farm size on efficiency. Using survey data from 300 farm households, the study employed data envelopment analysis (DEA) to measure efficiency and a bootstrapped truncated regression in the second stage to assess the determinants of efficiency. The results indicated that respondents had overall technical efficiency of 46.6 percent, pure technical efficiency of 65.1 percent and scale efficiency of 69.5 percent. Farm size had a significantly positive effect on scale efficiency with majority of the farms operating at increasing returns to scale. The determinants of efficiency included farm size, gender of the household head, access to credit and irrigation, number of extension visits, the degree of specialization in rice production and location of the farm. Most of the inefficiencies are either technical or scale in nature hence there is justification to increase the scale of production of smaller farms in order to take advantage of unexplored economies of scale. The technically inefficient farmers also need to reduce waste in resource utilization by improving their efficiency of resource use. The authors prescribe other policy measures needed to improve rice production in northern Ghana.