Profit efficiency of tea production in the northern mountainous region of Vietnam

Tea is known as one of the most economically efficient crop in Vietnam. However, tea profit efficiency in Vietnam as well as its relationship with market indicators and household characteristics has not been well understood. In order to have better understanding this relationship, this study was conducted using survey data in the Northern mountainous region of Vietnam from December, 2012 to December, 2013. A stochastic profit frontier model was applied to measure profit efficiency of Vietnamese tea production and analyze the impact of input prices and tea farmers` socio-economic characteristics on it. The study was designed as cross-sectional investigation which 193 tea farmers were randomly selected from various districts in the Northern mountainous region of Vietnam. The results show that there is high level of inefficiency in modern tea cultivation. The mean level of profit efficiency is 72.9 percent suggesting that an estimated 27.1 percent of the profit is lost due to a combination of both technical and allocative inefficiency in modern tea production. The profit efficiency difference is explained largely by farm size, household size, cooperative participation and irrigation.