When is Metafrontier Analysis Appropriate?: An Example of Varietal Differences in Pistachio Production in Iran

Abstract

Estimates of technical inefficiency in agricultural production are suspect so long as variations exist in production technology among the sampled farmers. Traditional methods of dealing with these technological differences risk attributing "technology gaps" to technical inefficiency between farms, pointing to the need to undertake a metafrontier analysis that allows technology gaps to be distinguished from technical inefficiency. Using farm-level data on the production of three different varieties of pistachio trees in Iran, we outline two criteria to justify its use: an inability in farmers to switch between production technologies except in the long term, and satisfaction of statistical tests on metafrontier coefficients. The application of metafrontier analysis enabled technical efficiency scores to be corrected for differences in production capacity imposed by tree variety. Results reveal that there is very little difference in technical efficiency between farms growing the different tree varieties. But they show that ignoring the production constraints imposed by variety choice could overstate the scope for farmers to improve their technical performance by adopting better farming practices. The results also indicate that it is misleading to compare the performance of different tree varieties on the basis of yield per hectare alone.