Technical Efficiency of Olive-growing Farms in the Northern West Bank of Palestine

Transcription

1 Sustanable Agrculture Research; Vol. 6, No. 2; 2017 ISSN X E-ISSN Publshed by Canadan Center of Scence and Educaton Techncal Effcency of Olve-growng Farms n the Northern West Bank of Palestne Kench Kashwag 1 1 Faculty of Humantes and Socal Scences, Allance for Research on North Afrca, Unversty of Tsukuba, Tsukuba, Japan Correspondence: Kench Kashwag, Faculty of Humantes and Socal Scences, Allance for Research on North Afrca, Unversty of Tsukuba Tennoda, Tsukuba, Ibarak , Japan. Tel: E-mal: kashwag.kench.fn@u.tsukuba.ac.jp Receved: February 13, 2017 Accepted: March 18, 2017 Onlne Publshed: Aprl 11, 2017 do: /sar.v6n2p125 URL: Abstract Ths study examnes the frm-level techncal effcency of olve-growng farms n the West Bank of Palestne. Usng a sample of 176 olve farms n the Jenn governorate collected durng September 2015, we estmated the Cobb-Douglas stochastc fronter producton functon. The results suggest that hgher levels of educaton of the head of farm households and farms wth a hgher densty of olve trees are assocated wth hgher techncal effcency. The ntroducton of rrgaton had a margnal effect on upgradng effcency. Enlargng the rrgated area had a negatve effect, but ncreasng the number of years of rrgaton had a postve mpact on effcency. Whle the mpact of access to export markets on techncal effcency was negatve and farms orented towards domestc consumpton of olve ol showed lower effcency, access to markets through olve presses and mddlemen contrbuted to mprove effcency. The results of the chosen half-normal model suggest that olve farms n Jenn have the potental to ncrease producton by 51.4% through more effcent use of technology and producton nputs. These results mply promoton of ntensve farmng wth mature olve trees and expanson of market access could contrbute to mprove techncal effcency of olve farms n the West Bank even under severe geographcal and geopoltcal condtons. Keywords: techncal effcency, olve-growng farms, rrgaton, West Bank 1. Introducton One of the solutons, suggested by studes on effcency, to overcome the low productvty of farms n developng countres s based on realzng the maxmum possble output wth avalable resources and gven technology. Followng the poneerng work of Farrell (1957), myrad theoretcal and emprcal studes have been devoted to the estmaton of stochastc producton fronters and effcency measures. Studes on effcency shed lght on the stochastc phenomenon and exstence of neffcency, but at the same tme they pont to the potental for mprovement under several constrants. The agrculture sector n the ard and sem-ard Medterranean regons often operates under constrants such as small sze of plots and harsh clmatc condtons; thus, mprovng producton effcency s crtcal to rasng agrcultural productvty, even f the contrbuton of techncal change and scale effects s less relevant. In the Medterranean regon, Palestnan agrculture under Israel occupaton s one such example where there are severe geographcal and geopoltcal constrants. Frst, land s segmented owng to the geography of the regon and most olve farms are located n mountanous areas. Israel occupaton of Area C mposes huge constrants on horzontal land expanson. Second, despte the annual ranfall, water s scarce relatve to ncreasng demand, and new development of groundwater s restrcted by Israel authortes. In addton, movement of modern nputs such as fertlzers s restrcted. In conjuncton wth lmted water supply, ths restrcts the scope for vertcal expanson of producton,.e., mprovements n land productvty. Ths stuaton, descrbed by Roy (1999) as de-development, contnues to be relevant to Palestnan agrculture even after the Oslo accords. In ths context, realzng fronter output under the gven constrants s one of the few ways of mprovng productvty. Despte the constrants under Israel occupaton, agrculture s a sector of relatvely hgh potental n the Palestnan economy. Wthn ths sector, cultvaton of olves and extracton of olve ol have a strategc poston and sgnfcant relevance to producton, job creaton and exports. Accordng to the Agrcultural Statstcs Survey 125

2 Sustanable Agrculture Research Vol. 6, No. 2; /2011, the number of olve trees stands at mllon, of whch mllon (88%) were frut bearng n 2011 (Palestnan Central Bureau of Statstcs [PCBS], 2012). The area under olves consttutes 53.9% of the total cultvated area, or 63.8% of the total area under hortculture trees n Palestne (PCBS, 2012). It s estmated that producton of olves n good harvestng years can produce as much as 15% to 19% of agrcultural output (World Bank, 2006). The total value of olve ol exports n 2014 was US$24.7 mllon, contrbutng 66.5% of total agrcultural exports and 2.6% of total exports (PCBS, 2015a). The contrbuton of olve producton to employment s also szable. The estmated number of famles engaged drectly or ndrectly n olve producton, ncludng the harvestng of olves, s estmated at 100,000 out of a populaton of 4 mllon (Mnstry of Agrculture, State of Palestne, 2014). Currently, 1,353 people are engaged n olve-ol extracton (PCBS, 2015b). Regardless of the potental of the Palestnan olve sector, t lags behnd compared wth Israel and other olve producng countres n the Medterranean regon. Despte the nearly dentcal natural envronment, the average yeld of olves n Israel ranges from 1.5 to 2.5 tons per hectare, whle t hovers between 0.4 and 2.4 tons n the occuped Palestnan terrtory (UNCTAD, 2015). The neghborng country of Jordan, whch has smlar envronmental condtons for olve cultvaton, enjoys approxmately 16.9% hgher productvty than Palestne (Mnstry of Agrculture, State of Palestne, 2014). In addton, there s a huge dfference n productvty throughout the West Bank, rangng from a hgh of 167 kg per dunum to a low of 40 kg per dunum (UNCTAD, 2015). 1 Accordng to the Mnstry of Agrculture, State of Palestne, productvty remans low relatve to ts potental and farmers have only basc cultvaton sklls; ths means that productvty levels can be ncreased by 30% to 40% f farmers wth small landholdngs adopt the approprate technologes (Mnstry of Agrculture, State of Palestne, 2014). Hence, one of the challenges facng the olve sector n Palestne s to realze the maxmum possble output, or what s called the fronter output, wth avalable nputs and the current level of technology. Gven these condtons, the objectves of ths study are to analyze the techncal effcency of olve farms n the West Bank and to dentfy the factors that can mprove effcency. We specfcally examne the mpact of rrgaton on techncal effcency. We conducted a survey n September 2015, enttled Survey of Olve Farms n the West Bank-Jenn, n collaboraton wth the Palestnan Central Bureau of Statstcs (PCBS), to collect mcro-data on olve farms n Jenn, located n the West Bank. The sample sze was 176, dstrbuted by strata desgn, and ncluded rrgated farms. We estmated the Cobb-Douglas specfcaton of the stochastc producton functon usng these mcro-data to nvestgate techncal effcency at the farm level, and to nvestgate the factors determne the level of effcency. Several studes have analyzed the techncal effcency of olve-growng farms. 2 Noteworthy and comparable among them are the studes n Medterranean countres such as Span, Greece and Tunsa. Lambarraa, Serra and Gl (2007) assessed relatve techncal effcency by decomposng the productvty growth of Spansh olve-growng farms, and found that farm locaton, age of manager, and composton of the workforce affect effcency levels. By lookng at the heterogenety of olve farms n Andalusa (Span), such as the age of olve trees, rrgaton, ntensty of farmng and land slope, Amores and Contreras (2009) examned farm effcency usng data envelopment analyss (DEA). For Greek olve farms, Tzouvelekas, Gannakas, Mdmore and Mattas (1999) estmated changes n techncal effcency and total factor productvty from 1987 to Ths study found consderable varatons n effcency levels among farms, but changes n effcency levels were neglgble durng the observed perod. In addton, and agan for olve farms n Greece, Karaganns and Tzouvelekas (2001) suggested that scale and allocatve effcency played a sgnfcant role n explanng output growth durng the perod As for the determnants of effcency, Tzouvelekas, Pantzos and Fotopoulos (2001) found a hgher degree of effcency n organc farmng compared wth conventonal farmng n Greece. For olve farms n Turkey, Cukur, Saner, Cukur, Dayan and Adanacoglu (2013) suggested there are huge dfferences n techncal effcency among olve farms and most olve farms do not operate n ther optmal scale. Comparng effcency between organc and conventonal olve farms n Turkey, Artukoglu, Olgun and Adanacoglu (2010) found techncal effcency of conventonal olve farms s less than that of organc farms. Ozden and Dos-Palmores (2016), whch examned olve ol frms n Tukey from the pont of ownershp structure, suggested experenced producton manager, and extensve specalzed tranng wth olve ndustry have postve effect on effcency. For Tunsan olve-growng farms, Lachaal, Karray, Dhehb and Chebl (2005) found that the share of productve trees, the share of sklled labour and agrcultural tranng had a postve mpact on mprovng techncal effcency. Although there are several studes on the estmaton of techncal effcency of olve producton n Medterranean countres, few have been done on Palestnan olve growers. Wth regard to the effect of rrgaton on farmng, many studes emphasze the necessty of ncreasng rrgaton 126

3 Sustanable Agrculture Research Vol. 6, No. 2; 2017 effcency n the context of water resource management. Valpour (2015b, 2016b) consdered the proporton of area equpped for rrgaton to cultvate area s one of the man ndces to assess agrcultural water management. Accordng to the estmaton by Valpour (2013c), the ndex s sgnfcantly lower n Afrca compared wth Afrca. The low value of ths ndex s comparable to the West Bank. Whle t s expected to ncrease n Afrca, lack of proper water management s consdered as a bottleneck resultng n the lower value of ths ndex (Valpour, 2015a). In emprcal studes on effcency of agrculture n Afrca, Chebl, Frja and Thabet (2015) examned rrgated wheat farms n Tunsa applyng DEA approach, and found source of rrgaton, membershp n water use assocaton, rrgaton management and farm sze are determnants. Speelman, D Haese, Buysse and D Hase (2008), whch nvestgated smallholder rrgaton farmers n South Afrca, suggested substantal decreases n water use can be attaned wth gven exstng technology and crop choce has a postve and sgnfcant effect on effcency. For hortcultural greenhouses n Tunsa, Frja, Chebl, Speelman, Buysse and Van Huylenbroeck (2009) suggested farmer s techncal tranng n greenhouse management, nvestments n water savng technologes and exstence of a fertgaton technque on farm have a postve effect on rrgaton water use effcency. Not only socal and economc attrbutes of farms but also techncal aspects of rrgaton systems and methods may affect rrgaton effcency. Valpour (2013b) suggested varous factors ncludng advantages and dsadvantages of surface and pressurzed rrgaton methods, must be taken nto account n the selecton of rrgaton system. Valpour (2013d) emphaszed the mportance of beng aware of hydrologc parameters ncludng surface water supply. Valpour (2016a) recommended forecastng the most crtcal ranfall month n sem-ard clmate condtons based on meteorodal nformaton n the prevous year. Dependng on sol condtons, Valpour (2012b) suggested the sgnfcance of selectng a proper dranage system ncludng horzontal and vertcal dranage. From the pont of dfference n rrgaton methods,.e., contnuous flow, cutback, fxed surge and varable surge, Valpour (2013a) found cutback and surge rrgaton methods were able to ncrease rrgaton effcency. Based on the emprcal study n Iran, Valpour (2012a) mpled determnaton of Hydro-module gves many advantages to experts and farmers, snce lack of the poor knowledge about water requrement to agrculture uses results n rrgaton neffcency. In the case of olve-growng farms, Amores and Contreras (2009) estmated DEA model appled to olve farms n Andalusa. The results of ths study suggested effcency s postvely related to the farm sze, and effcency mprovements observed n large farms come from adopton of rrgaton and newly planted trees. It consdered a percentage of the plot rrgated s one of the ndcators for typology of olve farms, but the effect of rrgaton on effcency s not explctly examned. Estmatng stochastc fronter producton functon for Tunsan olve farms, Lachaal et al. (2004) examned the effect of ntroducton of rrgaton on techncal effcency. Ths study found a postve mpact of rrgaton; however, effect of rrgaton condtons, such as changes of rrgated area, years of rrgaton and densty of trees, are not consdered. As far as we know, our study may be the frst study examned the effect of rrgaton on techncal effcency n more detaled applyng to olve-growng farms n West Bank. 2. Olve Producton and Productvty n Palestne Olve producton, n general, s characterzed by alternatng frut-bearng years, where one year s low bearng and the followng s hgh bearng. Changes n annual precptaton also make producton levels and prces more volatle. Table 1 presents the changes n olve producton, area and land productvty of rrgated and ran-fed areas n Palestne from 1999/2000 to 2007/2008. Annual producton levels and productvty fluctuated owng to the alteraton of frut-bearng years, yet land productvty remaned reasonably stable durng the observed perod. Except for the 2005/2006 season, land productvty of rrgated area was hgher than that of ran-fed area. On average, the yeld of rrgated areas was 414 kg per dunum, whereas t was 107 kg per dunum n ran-fed areas. Whle rrgated areas showed a slghtly ncreasng trend, the average percentage of rrgated areas remaned at 2.5% of the total bearng area. These results show that the effect of rrgaton on producton was postve; however, no sgnfcant mprovement n land productvty was observed. 127

4 Sustanable Agrculture Research Vol. 6, No. 2; 2017 Table 1. Change n Olve Producton, Area and Land Productvty n Palestne Irrgated area Ran-fed area Producton (Metrc tonne) Area (dunum) Land productvty (kg/dunum) Producton (Metrc tonne) Area (dunum) Land productvty (kg/dunum) 1999/2000 8,746 19, , , /2001 8,292 21, , , / ,583 23, , , /2003 6,555 22, , , / ,136 23, , , / ,438 23, , , /2006 3,077 22, , , / ,413 23, , , /2008 3,664 23, , , Average 9,434 22, , , Note. Data ndcate only bearng area. Source. Palestnan Central Bureau of Statstcs (PCBS). Agrcultural Statstcs. varous edtons. Ramallah. Table 2 presents olve producton, area, number of trees and productvty n the West Bank. Land productvty and producton per tree dffer among regons. Both land productvty and producton per tree are hgher n the northern West Bank than n the south. Whle the level of producton per tree s almost dentcal between the northern and the mddle of the West Bank, t s less than half n the southern West Bank compared wth the northern part. The dfference n annual precptaton and sol condtons may explan ths dfference n land productvty. However, wthn the northern West Bank, there are substantal regonal dfferences n land productvty. For nstance, productvty n the Salft governorate was more than double that n Qalqlya n the 2009/2010 season, rangng from kg to kg per dunum (Mnstry of Agrculture, State of Palestne, 2014). Ths hgh varablty may be partally explaned by natural factors, such as dfferences n annual precptaton (UNCTAD, 2015). Table 2. Olve Producton, Area, Number of Trees and Productvty n the West Bank, 2010/2011 Producton (metrc tonnes) Area (dunum) Number of trees Land productvty (kg/dunum) Producton per tree (kg/tree) West Bank 64, ,568 7,436, North of West Bank 48, ,578 5,134, Mddle of West Bank 10,244 73,829 1,102, South of West Bank 5,341 66,161 1,199, Source. PCBS (2012). Agrcultural Statstcs Survey 2010/2011. Ramallah. The Mnstry of Agrculture of Palestne formulated a General Framework for the Development of the Olve Sector n Palestne n 2012 n lght of the Agrcultural Sector Strategy Shared Vson of Ths framework dentfes the ways n whch the olve sector can be developed. In the Agrculture Sector Strategy of Reslence and Development, olves are dentfed as one of the man subsectors n agrculture. Currently, wth olve cultvaton beng seen as the backbone of Palestnan agrculture, the Mnstry of Agrculture has called for an olve sector strategy. Accordng to UNCTAD (2011), olve ol s a strong canddate amongst Palestne s tradable goods and deservng of promoton. Whle olve harvests have been hghly volatle, they contrbute to creatng a sgnfcant export potental (UNCTAD, 2011). Despte ts strategc sgnfcance, a sgnfcant mprovement n land productvty was not observed durng the 2000s (Table 1). Compared wth Israel and Jordan, the land productvty acheved by most olve farmers remaned below the potental (UNCTAD, 2015). Accordng to the Mnstry of Agrculture, the major challenge and constrant faced by olve famers n Palestne s low proftablty. The weakness n producton and productvty of olve farms lkely results from the small sze of holdngs, common ownershp and absentee owners, whch s related to Israel occupaton, and the parcelng of plots because of nhertance. These ssues may also explan why only weak techncal servces are avalable to farmers and why nsuffcent opportuntes exst for accessng loans that wll allow the replacement of ageng trees wth hgh-yeldng mproved varetes, as well as nadequate pest and dsease control (Mnstry of Agrculture, State of Palestne, 2014). World Bank (2006) ponted out producton costs are up to 30% hgher than n Jordan, despte smlar natural condtons. Ths low and stagnatng land productvty mples a low 128

5 Sustanable Agrculture Research Vol. 6, No. 2; 2017 contrbuton of techncal change over tme. In addton, neffcences,.e., the gap between the potental maxmum and current output from avalable nputs wth current technology, may exst. Although we observed changes n land productvty and compared ts regonal dfferences, we must remember that land productvty s only one of the measures of productvty. Improvements n productvty can also arse from techncal change, effcency mprovements, scale economes, or some combnaton of these three factors (Coell, Rao, O Donnell, & Battese, 2005). In Secton 3, we wll extend our dscusson to estmatons of the producton fronter of olve farms and measurements of ther techncal effcency. 3. Methodology 3.1 Model We employ the stochastc fronter model to parametrcally estmate producton fronters and levels of techncal effcency n olve producton. Followng Agner, Lovell and Schmdt (1977), and Meeusen and van den Broeck (1977), the stochastc fronter producton functon can be expressed as follows: Y v ; exp u X, F (1) where Y denotes producton output for the th farm; s a vector of unknown parameters to be estmated; X s a vector of nputs of producton and other explanatory varables assocated wth the th farm. The dsturbance term s composed of two parts. Frst, v refers to statstcal random dsturbance terms, whch are assumed to be ndependently and dentcally dstrbuted N(0, σ v 2 ). Second, u s the one-sded non-negatve random dsturbance term, and ts dstrbuton s assumed to be ndependently and dentcally dstrbuted but s modelled usng dfferent dstrbutonal assumptons. Agner et al. (1977) assumed a half-normal dstrbuton at zero mean,.e., u ~ d N + (0, σ u 2 ). Stevenson (1980) ntroduced the truncated normal formulaton,.e., u ~ d N + (, σ u 2 ). Meeusen and van den Broeck (1977) assgned an exponental dstrbuton, whereas Greene (1990) ntroduced a gamma dstrbuton. Jondrow, Lovell, Materov and Schmdt (1982) consdered both a half-normal and an exponental dstrbuton. Refschneder and Stevenson (1991) modelled gamma, truncated normal and exponental dstrbutons. Based on the above, the techncal effcency of producton of the th farm can be defned as: TE F( X ; )exp( v u ) exp u F( X ; )exp( v ). (2) Followng Kumbhakar, Ghosh and McGuckn (1991), Huang and Lu (1994), and Battes and Coell (1995), we adopt a sngle-stage approach for the estmaton of stochastc producton and neffcency equaton. In ths approach, explanatory varables are nserted drectly nto the neffcency error component. Ether the mean or the varance of the neffcency error components s assumed to be a functon of explanatory varables. The techncal neffcency effect, u, n the stochastc fronter model s specfed n Equaton (3): u ' z w, (3) where δ s a vector of the unknown parameters to be estmated; z s a vector of explanatory varables assocated wth techncal neffcency n producton; w s a random varable. For estmatng the stochastc fronter model, we specfy the producton functon as takng the Cobb-Douglas form: ln Y A ln X v u, (4) 0 j j j K, L, A where Y represents the quantty of olve producton measured n kg; j represents nputs used n olve producton (j = K, L, A); 0 and j are the unknown parameters to be estmated; X K s the captal stock used for olve producton measured n new Israel shekel (NIS); X L s total labour used to olve producton; X A s the total land area devoted to olve producton measured n dunum; v s the symmetrc dsturbance term accountng for random shocks and other statstcal nose; u s the one-sded non-negatve random dsturbance term denotng techncal neffcency. The dummy varable for the ntroducton of rrgaton, D IR, s ncluded to control for farm 129

6 Sustanable Agrculture Research Vol. 6, No. 2; 2017 characterstcs n the estmaton. The model of techncal neffcency effect could be specfed as follows: u H 0 h 1 z w, (5) h h where z h (h = 1, 2,, H) s the farm-specfc effcency related varables. Regardng the factors affectng effcency, many studes consder human captal as one of the determnants of agrcultural producton (Kalranjan & Shand, 1985; Stefanou & Saxena, 1988; Gorton & Davdova, 2004). For olve producton n Tunsa, a postve effect of human captal on effcency was confrmed by Lachaal et al. (2004) and Lachaal et al. (2005), whch represented human captal as a share of sklled labour. On the other hand, several studes have examned the mpact of ntensfcaton, represented by densty of olve trees, on the level of effcency. Accordng to Beaufoy (2001), olve farms n European countres are generally categorzed nto three types: low-nput tradtonal farms, ntensve tradtonal farms and ntensve modern farms. In these categores, the range of olve tree densty s one of the major ndcators for typology. Yelds vared sgnfcantly from 200 kg to 10,000 kg per ha, based on the type of farm. Comparng the levels of olve farmng ntensty n Span, Italy, Greece and Portugal, Wesstener, Strobl and Sommer (2011) found strong ntensfcaton n Span, followed by Italy, Greece and Portugal. Whle these studes focused on heterogenety, the typology of olve farms and dfferences n land productvty, they lacked dscussons on how they affected effcency. Introducton of rrgaton s a crtcal factor n the ntensfcaton of olve farmng. Drp rrgaton technology has now become major practce n new farms. Tradtonal type of olve farmng s beng ntensfed by the ntroducton of drp rrgaton, and densfed by plantng new trees n the rows between exstng trees (Beaufoy, 2001). As for the effect of rrgaton on effcency, a postve mpact was found by Lachaal et al. (2004) for Tunsan olve growers. In addton to the ntensty of land and rrgaton operaton, Amores and Contreras (2009) found that the age of olve trees s one of the major factors explanng the heterogenety of olve farms n Andalusa. In our model, we test the mpact of ncreasng the number of years under rrgaton on techncal effcency. Many studes suggested a negatve correlaton between farm sze and effcency n agrcultural operatons (Bravo-Ureta & Evenson, 1994; Al, Parkh, & Shah, 1994; Hallam & Machado, 1996; Bozog lu & Ceyhan, 2007). Our model examnes the effect of expanson of rrgated land on effcency. Regardng market access, Hart, Mljkovc and Shafk (2015), Mljkovc and Shak (2010), and Mljkovc, Mranda and Shak (2013) examned the effect of trade openness on techncal effcency. However, most studes found no or even a negatve mpact on effcency. In ths model, we test the varables of access to export markets, mddlemen and olve presses to examne ther mpact on techncal effcency. The techncal neffcency effect of the th farm s defned by equaton (6): u 0 1EDU 2TRD 3RIR 4YIR 5 DM (6) MD DM DM DD w, 6 EX 7 OP 8 HH where EDU denotes level of educaton of the head of the farm household; TRD denotes the densty of olve trees; RIR represents the proporton of rrgated area to the total area; YIR s years under rrgaton. We nclude dummy varables to represent the access to markets for extracted olve ol; thus, DM MD stands for farms that sell olve ol to mddlemen (merchants); DM EX represents farms that sell olve ol to consumers abroad (export); DM OP represents farms that sell olve ol to olve presses. The dummy varable DD HH denotes farms that consume olve ol domestcally. ( = 0 8) s an unknown parameter to be estmated, and w represents the error term. All parameters of the stochastc fronter producton functon n Equaton (4) and the model for techncal neffcency effects n Equaton (6) are estmated usng sngle-stage maxmum lkelhood estmaton (MLE) (Refschneder & Stevenson, 1991; Huang & Lu, 1994). 3.2 Data The data used n ths study s drawn from the Survey on Olve Farms n West Bank-Jenn conducted n collaboraton wth the PCBS durng September The area of land cultvated wth hortcultural crops ncludng olves was 659,894 dunums n the Palestnan Terrtory, ncludng 612,649 dunums n the West Bank and 47,245 dunums n Gaza Strp. In the West Bank, the largest cultvated area for hortculture trees was n the 130

7 Sustanable Agrculture Research Vol. 6, No. 2; 2017 Jenn governorate (17.9%) n 2010/2011 (PCBS, 2012). The survey chose ths governorate because of the large area under olve cultvaton. The area under olve-bearng trees n Jenn was 92,028 dunums and 96,335 tons of olves were produced n 2009/2010, the hghest n Palestne (Mnstry of Agrculture, State of Palestne, 2014). However, the average productvty of Jenn s lower than any other governorate n the northern West Bank. These fgures pont to the potental for the expanson of olve producton n Jenn. The sample sze of the analyss was 179 olve holdngs dstrbuted by strata desgn. A one-stage stratfed random samplng methodology was used and response rate was 89.5%. The 179 farm data ncluded rrgated and non-rrgated farms. Owng to mssng nformaton on the level of educaton and years under rrgaton, three data ponts were dropped. Ths left data for 176 olve farms whch could be subjected to emprcal analyss. Table 3 presents the summary statstcs of the varables. The dependent varable of the producton functon Y s the producton of olves measured n kg. The stock of physcal captal (K) s the total present value of all machnery and equpment used for olve producton. Labor nput, L, s represented by the total number of labor used n producton, ncludng famly and employed labor. Land, R, represents total cultvated area measured n dunum. A dummy varable of D IR captures the mpact of rrgaton. Wth regard to the ndependent varables of the neffcency effects model, EDU represents a dscrete varable of the farm head s level of educaton, rangng from llterate to doctorate holder. As a varable of ntensve producton, we nclude a varable of the densty of olve trees, TRD, measured by number of olve trees per dunum. A varable of the proporton of rrgated area to the total area, RIR, s added to examne the effect of expanson of rrgated area, and YIR denotes years under rrgaton. To examne the effect of marketng, we nclude a dummy varable, DM MD, representng farms that sell olve ol to mddlemen (merchants). Access to export markets, a dummy varable of DM EX s ncluded representng farms that sell olve ol to consumers abroad. A dummy varable DM OP represents farms that sell olve ol to olve presses. As some farms use the extracted olve ol by themselves, a dummy varable DD HH s added denotng farms that consume domestcally. Table 3. Summary Statstcs of the Varables Varables and measurement Mean value Standard devaton Maxmum Mnmum Y: Producton of olves (kg) K: Value of captal stock n use (NIS) L: Number of labour R: Cultvated area (dunum) D IR : Dummy varable of rrgaton (1: ntroduce rrgaton, 0: otherwse) EDU: Level of educaton (1: llterate, 2: can read and wrte, 3: elementary, 4: preparatory, 5: secondary, 6: assocate dploma, 7: bachelor, 8: hgher dploma, 9: master, 10: Ph.D.) TRD: Densty of olve trees (number/dunum) RIR: Proporton of rrgated area to total area YIR: Years under rrgaton (years) DM MD : Dummy varable of market of mddlemen (1: sell olve ol to mddlemen, 0: otherwse) DM EX : Dummy varable of market of export (1: sell olve ol to consumers n abroad, 0: otherwse) DM OP : Dummy varable of market of olve presses (1: sell olve ol to olve presses, 0: otherwse) DD HH : Dummy varable of domestc consumpton (1: use olve ol n house, 0: otherwse) Note. NIS ndcates new Israel shekel. 4. Emprcal Results and Dscusson Table 4 presents coeffcent estmates and correspondng standard errors. Maxmum lkelhood estmators based on the Cobb-Douglas stochastc fronter model and the techncal neffcency effects model are estmated usng the STATA11 package. We estmate three models followng the dstrbutonal assumptons of half-normal, truncated normal and exponental for the one-sded error term (u ). As the hypothess of constant returns to scale 131

8 Sustanable Agrculture Research Vol. 6, No. 2; 2017 (CRTS) cannot be rejected at the 10% level, we estmate three models wth dfferent dstrbutonal assumptons mposng a restrcton of the CRTS. The lkelhood-rato (LR) test rejects the null hypothess that the neffcency effects are absent,.e., u = 0, n the half-normal and exponental models. In the truncated normal model, the estmates of the varance parameters and are postve and statstcally sgnfcant at the 1% level. In addton, the LR test rejected the null hypothess of no farm-specfc effects (.e., 1 = 2 = 3 = 4 = 5 = 6 = 7 = 8 = 0) at the 5% level of sgnfcance. These results suggest that neffcency effects are sgnfcant for explanng dfferences n olve producton. The half-normal dstrbuton model s nested n the truncated normal dstrbuton for the one-sded error term. However, the LR test cannot reject the null hypothess that the truncated normal dstrbuton for u s napproprate. Hence, the use of the half-normal dstrbuton for u could not be rejected. Regardng the selecton of half-normal and exponental dstrbutons, the Akake and Bayesan nformaton crtera (AIC and BIC) were appled as the two models are non-nested. Both crtera favor the half-normal dstrbuton; ths dstrbuton mnmzes values of AIC and BIC relatve to the exponental dstrbuton. Ths mples that the half-normal dstrbutonal assumpton s more approprate than that of the exponental dstrbuton. Table 4. Coeffcents and Standard Errors of the Stochastc Fronter and Ineffcency Effects Models Normal-Half normal Normal-Truncated normal Normal-Exponental Varable Coeffcent standard standard standard Coeffcent Coeffcent error error error Stochastc fronter model Constant LnK * * * LnL Implct parameter of LnA D IR Ineffcency effects model Constant EDU * * TRD RIR YIR * DM MD * DM EX DM OP DD HH * Varance parameters 2 lnσ v σ Log-lkelhood No. of observatons AIC BIC Note. *,, ndcate sgnfcance at the 10%, 5% and 1% levels, respectvely. The statstcal problem to be resolved n ths model s the possblty of endogenety of TRD and RIR. These varables mght be correlated wth the error term. If endogenety exsts, the estmatons may produce based and nconsstent results. Followng Wooldrdge (2002), and Davdson and MacKnnon (2004), we employ the nstrumental varable method. Applyng the Durbn-Wu-Hausman test for endogenety, we specfy equatons showng that the decson regardng the degree of tree densty (TRD) and that for choosng the proporton of area of rrgaton (RIR) are affected by four nstrumental varables: cost of water (C W ), dstance to olve presses (DTP), a dummy varable for ntenton to own olve-ol mllng (D IO ) and another dummy for ntenton of drect mllng (D ID ). These nstrumental varables are selected snce they are hghly correlated wth the varables TRD and RIR but not wth the error term of equaton (6). To test for endogenety, we frst estmate the equaton that ncludes the ndependent varables of equaton (6) plus a set of the nstrumental varables. Then, we estmate the orgnal 132

9 Sustanable Agrculture Research Vol. 6, No. 2; 2017 equaton (4), ncludng the resduals obtaned from the frst estmaton. Under the null hypothess of the exstence of endogenety, the coeffcents of these addtonal resdual terms do not equal zero. If the null hypothess s rejected, TRD and RIR are not endogenous. Followng ths method, the endogenety test shows that the coeffcents of the resdual terms are nsgnfcant, even at the 10% level. Ths result thus rejects the possblty of endogenety of TRD and RIR. The results of the preferred half-normal model suggest that the sgns of the estmated parameters are as expected. The estmated coeffcents of captal stock and labor nput are postve and statstcally sgnfcant, confrmng that these are sgnfcant factors n determnng the level of output. Surprsngly, the rrgaton dummy s not statstcally sgnfcant. Ths mples that rrgaton does not contrbute sgnfcantly to ncreasng the output level. The estmated results of the chosen half-normal model and the other two models are largely consstent vs-à-vs the determnants of effcency, except for the proporton of rrgated area (RIR) and the market of mddlemen (DM MD ) varables, whch are not sgnfcant n the truncated normal model. From the estmated coeffcents of the neffcency equaton, three major factors are found to postvely affect the level of effcency. Frst, the estmated coeffcent of educaton level (EDU) s negatve and statstcally sgnfcant. Ths result shows that human captal accumulaton contrbutes to mprovng effcency. The postve mpact of human captal such as educaton, agrcultural experence and tranng on effcency n agrcultural producton has been wdely confrmed (Kalranjan & Shand, 1985; Stefanou & Saxena, 1988; Gorton & Davdova, 2004; Solís, Bravo-Ureta, & Quroga, 2009). For olve farms n Tunsa, Lachaal et al. (2004, 2005) found a postve relatonshp between the share of sklled labor and techncal effcency. To estmate equaton (6), we test the sgnfcance of the varables of age of farm head as well as years of farmng and tranng, but only the educaton level of the farm head was found to be sgnfcant. Second, the estmated coeffcent of the densty of olve trees (TRD) s negatve and sgnfcant. Ths suggests that more ntensve croppng s assocated wth hgher effcency. Accordng to the typology of Beaufoy (2001), for olve growers n Europe, tree densty ranges from 80 to 250 trees per ha n ntensve tradtonal farms, whereas t ranges from 200 to 400 trees per ha n ntensve modern farms. In Jenn, the average number of olve trees s 166 per ha, rangng from 88 to 266 trees. For olve farmng n Andalusa, Amores and Contreras (2009) establshed that modern technques such as rrgaton as well as new plantatons and ntensve farmng are the most mportant factors n current techncal effcency. 3 Followng the typology of Beaufoy (2001), olve farms n Jenn can be categorzed as ntensve tradtonal farms; and the evdence provded by Amores and Contreras (2009) suggests the possblty of mprovng effcency n Jenn through ntensfcaton of croppng. In addton, years under rrgaton (YIR) yelded a negatve, sgnfcant coeffcent. Ths suggests that farms become more effcent as the number of years of rrgaton ncreases. Regardng the relatonshp between rrgaton and techncal effcency, Frja et al. (2009) revealed a postve assocaton between rrgated water use effcency and techncal effcency for hortcultural greenhouse farms n Tunsa. Proett and Antognozz (1996) examned the relatonshp between rrgaton, productve actvty and frut qualty of table olves (cultvar ascolana tenera ), and concluded that rrgaton contrbuted to mprove the commercal value of the frut by ncreasng the sze and pulp/pt rato and ntensfyng frut colorng. The results heren are consstent wth these prevous studes. Amores and Contreras (2009), who classfed olve farms n Andalusa, consdered the unproductve youth perod of olve trees to be 10 years; and the average number of years under rrgaton n ther sample s eght. Accordng to Lachaal et al. (2004), ncreasng the share of productve olve trees,.e., those that are between 20 and 70 years old, has a postve effect on mprovng effcency n Tunsa. These results mply that more mature rrgated olve trees produce more frut even f other nputs are held constant. On the contrary, the estmated coeffcent of the proporton of rrgated area (RIR) s postve and statstcally sgnfcant. Ths result s unsurprsng but consstent wth the negatve relatonshp between farm sze area and effcency. Further, ths accords wth pror studes that have found a negatve relatonshp between farm sze and level of techncal effcency n agrcultural producton (Bravo-Ureta & Evenson, 1994; Al et al. 1994; Hallam & Machado, 1996; Bozog lu & Ceyhan, 2007). For Greek olve farms, Tzouvelekas et al. (2001) suggested that larger farms tend to have lower effcency than small farms. These results mply that enlargng the rrgated area does not contrbute to effcency ncreases n Jenn, whereas more ntensve croppng wth mature olve trees s a postve factor n mprovng effcency. Ffth, the estmated coeffcents of the dummy varables DM MD and DM OP are negatve and statstcally sgnfcant. These results suggest that farms that sell ther extracted olve ol to mddlemen and olve presses exhbt hgher effcency. Moreover, the estmated coeffcent of DD HH s postve and sgnfcant. Ths suggests 133

10 Sustanable Agrculture Research Vol. 6, No. 2; 2017 that effcency s lower on farms that consume olve ol domestcally. Regardng the effect of access to export markets (DM EX ), the estmated coeffcent s postve and statstcally sgnfcant. Thus the effect of access to export markets on effcency s negatve, whch does not mmedately appear to accord expectaton. However, Hart et al. (2015) examned the mpact of trade openness on techncal effcency of the EU s agrcultural sector. Ths study suggested trade openness has an mmedate negatve mpact on effcency, but t contrbutes to ncrease effcency over tme. For US agrculture, over , Mljkovc and Shak (2010) found that a decrease n the share of agrcultural mports to agrcultural GDP had a postve mpact on ncreasng techncal effcency, whereas an ncrease n the share of agrcultural exports had no mpact. In Brazlan agrculture, Mljkovc et al. (2013) found ncreased exports do not have a sgnfcant mpact on techncal effcency. In the case of Palestne, the man destnaton of olve ol exports has long been Israel, wth the exports averagng 4,000 tons per year (UNCTAD, 2015). However, the customs unon arrangement mposed by Israel on the occuped terrtores prevented the entry of Palestnan products nto Israel whle Israel s own heavly subsdzed products are allowed to enter freely nto Palestnan markets (Naqub, 2003). Palestnan farmers have reduced the use of fertlzers consderably followng Israel restrctons on mported agrcultural nputs (UNCTAD, 2015). In addton, the large mgraton of Palestnan workers to Israel and the transmsson of nflatonary trends n the Israel economy to Palestnan markets have eroded the compettveness of Palestnan trade (Astrup & Dessus, 2001; Abugamea, 2010). These asymmetrc trade relatons between Palestne and Israel may prevent expandng Palestnan opportuntes for olve ol exports. In ths sample, ndeed, access to export markets s qute lmted. Although most studes have been unable to confrm the postve lnk between trade openness and techncal effcency, we found a negatve mpact of effcency n the case of Jenn. In other words, access to local markets seems to be more relevant than access to export markets. The negatve sgn of DM MD and DM OP as well as the postve sgn of DD HH mply market-orented farms are assocated wth hgher effcency. Saldas and von Cramon-Taubadel (2012) found that market access, measured by dstance to the nearest man road, has a postve effect on farm effcency for small farmers n Chle. Although the mpact of openness to export markets on effcency s negatve, market-orented farms seem to be relatvely effcent. The frequency dstrbuton of techncal effcency s presented n Table 5. The average level of techncal effcency of the half-normal and truncated normal models are 48.6% and 46.1%, respectvely, whereas t s estmated at 55.9% for the exponental model. The estmated effcency scores of the preferred half-normal model ndcate the exstence of techncal neffcency n olve farms. The average level of techncal effcency s estmated at 48.6%, rangng from a mnmum of 2.0% to a maxmum of 95.3%. It s suggested that farms n ths sample are producng, on average, at 51.4% of ther potental at the current levels of technology and nput. Sxty-nne farms (39.2% of the total sample) are relatvely neffcent on a wthn-sample bass, wth scores of less than 40.0%. It should be noted that the level of techncal effcency of 22.7% of sample farms ranges from 20.0% to 40.0% whle there exsts 23.9% of farms whose effcency s between 60.0% and 80.0%. As there are two dstnct peaks,.e., two local maxma n a hstogram around 20.0% and 80.0% of effcency level wth a valley separatng them, the pattern of the dstrbuton of effcency can be bmodal. Ths pattern mpled there are both less effcent group and more effcent group of farms. Comparng ths bmodal pattern of effcency dstrbuton between rrgated and non-rrgated farms, the pattern s rather multmodal for non-rrgated farms, and for rrgated farms we found two local maxma around 40.0% and 70.0% of effcency level. It mpled level of effcency seems to be convergng for rrgated farms compared wth non-rrgated. 134

11 Sustanable Agrculture Research Vol. 6, No. 2; 2017 Table 5. Frequency Dstrbuton of Techncal Effcency Note. Percentages are n parentheses. Normal- Half normal Normal- Truncated normal Normal- Exponental Effcency levels TE < (16.5) (18.8) (10.8) 0.2 < TE < (22.7) (27.3) (21.6) 0.4 < TE < (22.2) (19.9) (17.0) 0.6 < TE < (23.9) (20.5) (27.8) TE > (14.8) (13.6) (22.7) Effcency scores Mean Medan Standard devaton Mnmum Maxmum These wde varatons n the level of techncal effcency n olve producton are not surprsng; however, the average level of techncal effcency s dscernably low n the case of the West Bank. For comparson wth other olve producng countres n the Medterranean regon, the overall techncal effcency of olve farms n Greece was stable from 74.9% (1987) to 76.8% (1993) (Tzouvelekas et al., 1999), whereas t showed a decreasng trend n the case of the sland of Crete, from 87.5% to 63.7% durng the same perod (Tzouvelekas, Gannakas, Mdmore, & Mattas, 1997). Smlarly, the estmated level of techncal effcency for Spansh olve farms was 75.5% on average durng the perod (Lambarraa et al., 2007). For Tunsan olve farms, the estmated techncal effcency for the Mahda regon was 83.5% on the bass of data collected from 1999 to 2002 (Lachaal et al., 2004), whereas t was 82% for farmers n the Sfax regon, over the perod from 1994 to 1997 (Lachaal et al., 2005). The estmated results of techncal effcency for farmers n Jenn reveal the exstence of relatvely neffcent farms; however, they also suggest the possblty of ncreasng producton by 51.4%, gven the current state of technology and nput levels. Results of the comparson of effcency scores between rrgated and non-rrgated farms are presented n Table 6. In all dstrbutonal assumptons, average techncal effcency of rrgated olve farms s slghtly hgher than that of non-rrgated farms; however, the dfference s not statstcally sgnfcant. In the agrcultural sector n Medterranean countres, Hassne (2007) found a postve mpact of the ntroducton of rrgaton on techncal effcency. In wheat producton n Tunsa, the ncrease n water resources and adherence to a water users assocaton were assocated wth hgher effcency (Chebl et al., 2015). For olve farmers n the Mahda regon of Tunsa, Lachaal et al. (2004) found a postve mpact of rrgaton on effcency mprovement. Despte these fndngs n some regons of Medterranean countres, n the West Bank of Jenn, the ntroducton of rrgaton does not sgnfcantly contrbute to ncrease effcency. One possble explanaton s the dfference n age of olve trees between rrgated and non-rrgated. Amores and Contreras (2009) consdered the youth the age of olve trees below 10 years old s unproductve youth perod. For the analyss on Tunsa olve farms, Lachaal et al. (2004) used the share of productve olve trees from 20 to 70 years old as an explanatory varable of the neffcency equaton. The fndng suggests a postve mpact of ncreasng n the share of productve trees on effcency mprove. These results suggest ncreasng number of productve trees may contrbute to ncrease effcency. However, n the case of Jenn, the average age of rrgated olve trees, non-rrgated are 41, 44, respectvely. As the dfference n the average age of trees s margnal, the explanaton by the dfference n age of trees s less relevant. Another possble explanaton s the effect of scale neffcency. Results of effcency analyss on olve farms usng DEA by Amore and Contreras (2009) n Andalusa suggested that overall effcency score under the assumpton of varable returns to scale s hgher n rrgated farms than non-rrgated, but the score of scale effcency of rrgated farms s lower than that of non-rrgated. These results suggest 135

12 Sustanable Agrculture Research Vol. 6, No. 2; 2017 rrgated olve farms are techncally effcent but neffcent n scale compared wth non-rrgated. Ths experence n Span mples the dffculty to realze optmal scale even for more advanced olve farms n Andalusa. Gong back to the case of Jenn, our estmaton of techncal effcency scores n Table 6 ncludes scale effcency or neffcency. The relatvely low scores of techncal effcency n rrgated farms may reflect scale neffcency. However, for more detaled analyss, we need to mplement DEA to estmate pure techncal effcency dfferentated from scale effcency. Table 6. Comparson of Techncal Effcency between Irrgated and Non-Irrgated Farms Normal- Half normal Normal- Truncated normal Normal- Exponental Number of observatons Techncal effcency of rrgated farms (0.248) (0.247) (0.245) Techncal effcency of non-rrgated farms (0.263) (0.258) (0.265) Mean dfference t-statstcs Note. Standard devatons are n parentheses. 5. Concluson To our knowledge, ths study may be the frst attempt to examne the techncal effcency of olve farms n Palestne. The objectve s to estmate the level of techncal effcency and dentfy the sources of effcency n olve producton. Collaboratng wth the PCBS, we mplemented the survey on olve-growng farms n Jenn durng September Usng the collected data of 176 olve farms, we estmated a Cobb-Douglas stochastc fronter producton functon smultaneously wth techncal neffcency effects. Our emprcal results suggest that the educaton level of the head of farm households and a hgher densty of olve trees contrbute to mprove the techncal effcency of olve farms n Jenn. Increasng the years of rrgaton has a postve mpact on effcency but enlargng the rrgated area has a negatve effect. Access to export markets s actually lmted, but farms exportng olves are assocated wth lower effcency. Whle those farms whch use olves domestcally exhbted lower effcency, farms wth access to mddlemen and olve ol presses,.e., market-orented farms, showed hgher effcency. The average level of techncal effcency of the chosen half-normal model was estmated at 48.6%, rangng from a mnmum of 2.0% to a maxmum of 95.3%. Compared wth other farms n the Medterranean regon, the relatvely low effcency scores suggest the exstence of substantve farm level neffcences. Comparng average effcency scores between rrgated and non-rrgated farms, we found the effect of rrgaton to be margnal. Overall, our results suggest that olve farms n Jenn have the potental to ncrease ther producton by 51.4% through more effcent use of technology and producton nputs. These results mply that the promoton of ntensve farms wth mature olve trees and expandng access to markets would contrbute to upgrade the effcency of olve farms n the West Bank operatng under severe geographcal and geopoltcal constrants. As Beaufoy (2001) suggested, ntensfcaton of olve farmng wth rrgaton s becomng ncreasngly wdespread n many regons of Medterranean countres. The results of ths study provde the emprcal evdence to support the adopton of more ntensve farmng by means of rrgaton, hghly densfed plantaton (ncrease n tree densty) wth contnuous rrgaton (ncrease n years of rrgaton). Our study also mples the promoton of ntensve farmng wth rrgaton rather than a mere expanson of rrgated area would be effectve to realze the best practce for olve producton even under the severe condton of water scarcty. Acknowledgments The author gratefully acknowledged that ths research was supported by the Japan Scence for Promoton of Scences (JSPS) under the Grant-n-Ad for Challengng Exploratory Research, No , enttled: Research on Promoton and Development of Olve Industres n West Bank for Peace and Prosperty. The author thanks the Palestnan Central Bureau of Statstcs for ther collaboraton n mplementng the survey of Jenn. References Abugamea, G. H. (2010). The compettveness of the Palestnan foregn trade: A contegraton analyss. ERF 136