Technical efficiency in cotton production: the role of premium payments in Turkey

Abstract

Providing about two million employments from textile to agriculture, cotton is an important and a strategic product for Turkey. Thus, support programs become critical and crucial for the cotton production. For cotton farmers, premium payments affecting the cost measures become vital next to the market prices. This study measures the technical efficiency of cotton production, incorporating support premium payments as one of the background variables to capture the effect of premiums on efficiency scores for cotton production using stochastic frontier model. The premium payments found to be the most important determinant of inefficiencies, and the results of our analysis suggest that premiums paid to farmers increase efficiency for cotton production. In addition, regional production was important explaining inefficiencies. Although three regions in Turkey did not behave parallel and showed different characteristics in production, efficiency gap between these regions is closed recently.