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Abstract
This paper measures and explains technical efficiency of 371 dairy farms located in
seventeen districts in East African Countries. Four output and nine input types were used to
calculate the efficiency scores for each farm. A two-stage analysis was conducted to measure
and explain the efficiency scores. First, the efficiency scores were measured by using a data
envelopment analysis (DEA) approach which was implemented with a linear programming
method. About 18% of the farms were fully productive, each with efficiency scores of unity,
which meant this group is currently operating on the production possibility frontier. On the
other hand, about 32% of the farms have efficiency scores below 0.25, which means about a
third of the dairy farms would need to expand dairy production by at least 75% from the current
level without any increase in the level of inputs. Second, a fractional regression method was
used to explain the efficiency scores by relating then to a range of explanatory variables. The
findings indicate that technology adoption factors such as the existence of improved breeds; feed
and fodder innovations (e.g. growing legumes) have positive and statistically significant effects
on the level of efficiency. Similarly, zero-grazing seem have positive and highly significant
effects. As far as marketing variables are concerned, interestingly selling milk to individual
consumers or organizations seems to contribute to dairy efficiency positively and significantly
than other marketing outlets such as traders of chilling plants. Membership of dairy cooperative
has a positive effect but this is not statistically significant.