Explaining technical inefficiency and the variation in income from apple adoption in highland Ethiopia: The role of unequal endowments and knowledge asymmetries

Abstract

This paper considers the performance and quality of apple fruits and seedlings production in Chencha district of southern Ethiopia. The estimated, three-factor (labour, land and capital) production frontier reveals that the technical inefficiency is 60% and 48% for fruits and seedlings production, respectively. Endowments in land, apple plantation and manure are important production factors for both fruits and seedlings, while labour is significant only for seedlings production. We could not reject constant returns to scale, neither for apple fruits nor for seedlings. Apart from capital and labour endowments, producer knowledge on apple cultivation is a positive and significant determinant of the level of output, product quality, and income generated from apples. The insignificance of the education variable for fruits and seedlings production suggests that what matters in the apple business is specific knowledge of apple-growing technology rather than formal education, at least beyond primary education.