ABSTRACT:
This study examines the technical efficiency and influencing factors of oil palm production by plasma smallholders in Indonesia. The common method of analysis for this type of study is the stochastic frontier method based on the translog production function. The agricultural business household income survey (2013) of the Central Statistics Agency was used as a secondary data source where there were 2438 oil palm plasma smallholders registered in the Indonesian oil palm sector. The study found that the average value of technical efficiency of these plasma smallholders is 0.59 which means that there is room for improvements to increase it further. East Kalimantan has the highest efficiency value, compared to other provinces. Moreover, education and association memberships of smallholders, and seed quality had positive effects but the effect is negative with age of the smallholders in the oil palm sector in Indonesia. The distribution of technical efficiency level of farmers showed that only 0.94% of plasma farmers were efficient in their production. The Indonesian government should emphasize training programmes for plasma farmers to improve their efficiency in production
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