The objective of this study is to review economic efficiency of smallholder farmers in sesame production in Ethiopia. Specifically, the review examines levels of Technical, Allocative and Economic efficiencies of sesame producer; and to review factors affecting efficiency of smallholder farmers in the study area. For this study both published and unpublished sources were used. Also, the study reviewed various functional forms that were fitted to estimate Technical, Allocative and Economic efficiencies levels and model that were fitted to estimate factor affecting efficiency of smallholder farmers. The review results indicate Cob-Douglas function and Translog functional form are alternative methods for evaluating efficiencies and were used for purposes of comparison; OLS is mainly used if the inefficiency scores are not truncated or censored for a specific value; Tobit regression approach is preferred over the OLS regression in the case of censored data. The review results indicate as there is a room to increase the efficiency of sesame producers. Variables such as non-farm income and credit access, experience in sesame production, distance of sesame farm from residence, education level and extension contact had major significant impact on Technical, Allocative and Economic efficiency. In order to improve efficiency of smallholder farmers in sesame production in Ethiopia, give consideration to the above mentioned socio economic and institutional factors is needed. Focusing on efficient use of existing resources and addressing the socio-economic and institutional factors by using existing technology and given input levels are crucial and relevant policy issues are recommended. Strengthening the existing livestock production system, credit access, agricultural extension system and invest in the provision of basic education to smallholder farmers are advisable.
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