Analysis of factors affecting the technical inefficiency on Indonesian palm oil plantation

Indonesia’s palm oil plantation is dominated by three actors. Among three actors, the productivity of smallholder farmers has the lowest productivity. This study aims to analyze the value of technical efficiency and factors affecting the technical inefficiency of palm oil plantations in Indonesia by using the stochastic frontier analysis based on the translog production function. The data used in this study are taken from the Central Statistics Agency (Agricultural Business Household Income Survey) in 2013. The number of samples used was 14,367 farmers. The results revealed that the average value of technical efficiency (58.32%) is still far to reach its optimal, showing that there is still to increase in the efficiency of palm oil plantations in Indonesia. The production function suggests that increasing the number of trees can help to increase the number of outputs. To enhance the technical efficiency, education, age, planting system, seed quality, extension service, and plasma farmer are the significant factors.