Fantu Bachewe

The State of Subsistence Agriculture in Ethiopia: Sources of Output Growth and Agricultural Inefficiency Fantu Bachewe

Agriculture dominates the Ethiopian economy, accounting for about 50 percent of its GDP and 82 percent of its employment. However, the sector has always performed poorly. The largest proportion of farmers live below the poverty line and few and poorly provided social amenities are available in rural areas. Sectoral-level data shows that the farmers in Ethiopia use little modern inputs, output per hectare is low, and land holdings have been increasingly fragmented. Although fertilizer is the most widely used modern input, application rates are abysmally low. Use of improved seeds and pesticides is almost nonexistent. Among a group of comparable countries Ethiopian farmers performed the poorest. If Ethiopian farmers were to achieve the average yield levels reported in these countries it would at least be self-sufficient in cereals production. This study used panel data to analyze the sources of output growth and technical efficiency among subsistence farmers in Ethiopia. A stochastic frontier analysis (SFA) was used to assess the variation in technical efficiency in addition to accounting for the sources of growth in agricultural output.