Production Efficiency and Market Orientation in Food Crops in North West Ethiopia: Application of Matching Technique for Impact Assessment

INTRODUCTION: Agricultural technologies developed by national and international research institutions were not benefiting the rural population of Ethiopia to the extent desired. As a response, integrated agricultural extension approaches are proposed as a key strategy to transform the smallholder farming sector. Improving Productivity and Market Success (IPMS) of Ethiopian Farmers project is one of the development projects initiated by integrating productivity enhancement technological schemes with market development model. This paper explores the impact of the project intervention in the smallholder farmers’ wellbeing. METHODS: To test the research hypothesis of whether the project brought a significant change in the input use, marketed surplus, efficiency and income of farm households, we use a cross-section data from 200 smallholder farmers in Northwest Ethiopia, collected through multi-stage sampling procedure. To control for self-selection from observable characteristics of the farm households, we employ Propensity Score Matching (PSM). We finally use Data Envelopment Analysis (DEA) techniques to estimate technical efficiency of farm households. RESULTS: The outcome of the research is in line with the premises that the participation of the household in the IPMS project improves purchased input use, marketed surplus, efficiency of farms and the overall gain from farming. The participant households on average employ more purchased agricultural inputs and gain higher gross margin from the production activities as compared to the non-participant households. The non-participant households on average supply less output (measured both in monetary terms and proportion of total produce) to the market as compared to their participant counterparts. Except for the technical efficiency of production in potato, project participant households are better-off in production efficiency compared with the non-participant counterparts. CONCLUSION: We verified the idea that Improving Productivity and Market Success (IPMS) of Ethiopian farmers’ project has contributed for the input and out market integration and/or market oriented agricultural production. Overall, we argue that these can be seen as an experimental model with a promising potential to improve the livelihood of the poor. Furthermore, we suggest that it is worthwhile to employ integrated agricultural extension programs with further targeting in the developing world.