Understanding heterogeneity in Peruvian agriculture: A meta-frontier approach for analyzing technical efficiency

This paper describes an empirical application of a stochastic method for estimating meta-frontier production functions described by Huang, Huang, and Liu (2014) that has been little applied in the context of heterogeneity of production technology. We use nationally and regionally representative data to explore patterns of productivity within and between regions of Peru and to understand factors that influence technical efficiency. We estimate a stochastic national meta-frontier that allows for a comparison between different systems in relation to the agricultural sector as a whole. Our results support the view that even though total factor productivity (TFP) and technical efficiency (TE) measured at national level are rising steadily, significant differences persist within the country. The extreme heterogeneity of Peru s agricultural sector is reflected in different realities between its regions and farming systems. Levels of productivity technical efficiency differ not only between regions, but also within regions, because farmers located within the same region are not equally productive or efficient. Acknowledgement :