Analysis of Economic Efficiency in charcoal production in Northwest Ethiopia: A Cobb-Douglas Production Frontier Approach

Abstract Charcoal is the primary fuel source to urban and rural households of Ethiopia. However, its production is not efficient in most developing countries including Ethiopia. Therefore, this study was designed to determine the factors that influence the economic efficiency of charcoal production in Northwest Ethiopia using cross-sectional data collected from 372 households. Cobb-Douglas production frontier and Tobit models were used to determine the determinants of economic efficiency. The results revealed that area of planted land, plant seedling, and labor are the variables that influence charcoal productivity. The estimated technical efficiency, allocative efficiency, and economic efficiency scores were 85%, 94% and 80%, respectively. The sex and the age of the household head, the size of the household, the duration that the household was producing charcoal, charcoal production as a major livelihood base, producing charcoal for marketing purpose as a major motive, and Acacia decurrence as the major type of tree for producing charcoal were the influential variables of economic efficiency in charcoal production. Since the cropping cycle practiced in Northwest Ethiopia can benefit the environment, and since charcoal production generates income to a very large number of households, the government can use the findings of this study to expand its intervention in the charcoal sector and promote charcoal production and productivity in an environmentally sustainable way.