Technical Inefficiency of Philippine Corn Farms

An Approach Using Frontier Cost Function

Abstract

Using the data obtained from corn farmers in the major corn producing province of Cagayan Valley in the Philippines, a stochastic frontier cost function was estimated. We found that the average cost function was located 20% above the frontier function, reflecting the existence of significant technical inefficiency among the corn farmers. Considering the present level of price difference between the domestic and international corn markets, however, the total reduction of this degree of technical inefficiency, even if possible, is not sufficient to make corn farming in the Philippines competitive enough. If the competitiveness of Philippine corn production were to be maintained or strengthened, larger efforts in research for continuous enhancement of the technology frontier itself at a rapid pace should be made.