Technical efficiency of the dual -purpose cattle system in Venezuela

The dual-purpose cattle system (DPCS) is the traditional cattle production system in the lowland tropics of Latin America where crossbred cattle are used for the production of milk and beef. This system is based on local and low cost inputs, but has been often considered to be inefficient due to its low partial productivity indices when compared with those used in developed countries. Few data exist about the efficiency of this system but the scant literature available is based on partial productivity indices. These indices provide useful information but do not take into account the effect of total inputs on total outputs as a measure of total efficiency. This study attempts to provide standard measurement of the technical efficiency (TE) of this system based on the concept of total factor productivity. An analysis is conducted to estimate the main determinants TE of the DPCS located in Zulia State, Venezuela.;A deterministic production frontier model and two stochastic production frontier models (half normal and exponential distribution for the error term) were estimated on a sample of 127 farms. The Cobb-Douglas functional form was used. Average TE values were 0.630, 0.819, and 0.922 for the deterministic, half-normal and exponential models. Higher values were obtained for the stochastic models because these models separate the effect of random noise from the effect of technical inefficiency. However, the ordinal ranking of the farms according to their TE values was similar. In a second stage, TE values were regressed against some socio-economic and technological variables in order to explain the variation on efficiency. A logistic model was used since the dependent variable (TE) is bounded by zero and one. The parameters of this model were calculated using the OLS technique. The significant positive factors were farmer experience, farmer's presence on the farm, location, production system, cow productivity, and frequency of technical assistance. Farm size and labor productivity showed a quadratic effect and credit a negative impact. The simulation model suggests how policies and managerial decisions to address these variables could help improve efficiency of this system.