Climate variability and agricultural production efficiency: evidence from Ethiopian farmers

It is known that climate and weather variability have negative impacts on agricultural production efficiency. The aim of this study is to analyse the impact of climatic variables on farms’ efficiency in Ethiopia making use of nationally representative datasets from Living Standards Measurement Study – Integrated Surveys on Agriculture (LSMS-ISA) 2011/2012. By using the Stochastic Frontier Approach, we estimate simultaneously the farmers’ optimal production function and technical inefficiency equations, taking into account unobserved heterogeneity of farmers. Our main findings show that climate change variables have a positive effect on households’ efficiency but the impact depends on the different geo-climatic characteristics of the regions of the country.