Evaluating the Role of Trade Openness and Trade Openness Risk on Agricultural Production Efficiency: An Empirical Analysis of Sub-Saharan African Countries

Abstract

The impacts of trade openness and trade openness risk on the technical efficiency of agricultural production were examined using an extended stochastic frontier analysis econometric model. This model simultaneously estimates a primal production function equation and an efficiency equation. The primal production function estimates the contribution of land, labor, capital and fertilizer inputs to endogenous output. The efficiency equation estimates the importance of trade openness, short-term and long-term trade openness risk. A panel of 31 of the 47 Sub-Saharan African countries was used in the estimation over 40 year period, 1970 to 2009. Empirical findings showed differential impact of trade openness, short-term and long-term trade openness risk on efficiency. Specifically, results revealed that a one unit increase in trade openness reduced inefficiency by 0.695 percent, while a one unit increase in trade openness risk in the short-term and long-term increased the inefficiency level by 0.91 percent and 1.301 percent, respectively.