Bridging Efficiency Gaps in Rice Production: A Primal System Analysis of Technical and Allocative Constraints in Bangladesh

Declining natural resources, rising production costs, and diminishing returns from input‐intensive practices threaten the sustainability of smallholder rice systems in Bangladesh. Using a primal system approach and survey data from 1869 rice‐producing households, this study evaluates technical and allocative inefficiency across major agro‐ecological zones and examines factors associated with inefficiency‐driven cost increases. Results reveal substantial technical inefficiency, equivalent to a loss of one quarter of potential output. Allocative inefficiency is also pronounced, with seeds, fertilisers, and labour overused while machinery remains underutilised. Together, these inefficiencies inflate production costs by 48%, with technical inefficiency being the primary driver. Cost increases from technical inefficiency are shaped primarily by environmental and managerial conditions, whereas those from allocative inefficiency reflect market access constraints and institutional arrangements. Notably, plot size generates trade‐offs between productivity gains and optimal resource allocation. Closing these gaps requires targeted technological, institutional, and market reforms under increasing climatic and resource pressures.