Technical Efficiency of Rural Nepalese Farmers as Affected by Farm Family Education and Extension Services

An analysis of agricultural productivity revealed that capital, that is, inputs, other than land and labor, is an important production input that is also significant. Land also has a positive and significant contribution. Family labor is positive; however, hired labor is negative, though both are insignificant. Moreover, the technical inefficiency model revealed that agricultural extension services provided by non-governmental organizations have a positive and significant contribution, and it increases technical efficiency of the farm. Therefore we recommend policy that increases the role of non-governmental organizations in providing agricultural extension services. Similarly, the share of educated persons per household is also significantly and positively related to technical efficiency, so providing educational services to these households may also be helpful. However, in contrast to our expectation, government extension is found to have a negative effect on efficiency, though it is insignificant. As we can expect, because governmental organization takes the lion's share in terms of coverage, policies should be made favorable to improve their performance in providing agricultural extension services. An analysis of technical efficiency on farms revealed that on average they are operating well below the frontier, with the average technical efficiency being 69%; obviously there is ample room for improvement. With little changes in the production process, technical efficiency of the selected farms could be increased on average by up to 30%