PRODUCTION RISK AND TECHNICAL EFFICIENCY OF TILAPIA AQUACULTURE FARMING IN BANGLADESH

Tilapia is a relatively fast-growing fish species that has huge potential for production in Bangladesh. Despite its impressive growth, production is highly volatile across farms and location. There are several sources of production volatility; both output risk and/or inefficiency will lead to variation in production. While a number of studies has been focusing on either technical efficiency or the adaption towards risk, few studies have been conducted of the combined effect of production risk and technical inefficiency in aquaculture. By employing a stochastic production frontier model with flexible risk specification, this article quantifies production variability of tilapia fish farming by means of two main possible sources: production risk and technical inefficiency. Further, the analyses identify the factors influencing risk and inefficiency. Knowing the source of the variation is vital for farmers and policy makers in choosing the right strategy to discard the production variation.The empirical analysis is based on cross-sectional data from 339 sample farms. Main findings are that significant production risk and technical inefficiency exists in tilapia farming.