The overall aim of this study is to investigate reasons for differences in productivity, efficiency, and profitability across the farms and over time of Bangladesh pond aquaculture industry. In more, specifically the study is focused on the effects of agglomeration externalities, production environmental heterogeneity, management practices, and managerial ability on technical efficiency and profitability. In addition, this study identifies what constitutes the farmers’ risk perception and risk management strategies, based on farm level data in Bangladesh. Finally, how the productivity, technology and technical efficiency are changing over time in Bangladesh pond aquaculture are also examined.
The background factors of the study are that the sector is growing fast and aquaculture farms tend to cluster in a region, production environment across the regions are different but the used production technology is common, and management practices and managerial ability vary between farms. Furthermore, the farmers and farms’ social and economic backgrounds have been resulting differences in perceived risk and management strategies. Again, all of these combined with many other factors may cause slower growth in productivity and efficiency improvement over time.
The literatures on aquaculture industry also evidence that farms can become more efficient than they are; if technologies are appropriately chosen and efficiently used, farms are located in high cluster region and then if production technology is adopted accounting for the local production condition, following improved business management practices and if managerial ability can be improved. Furthermore, the perceived sources of risk and their management strategies differ between the farms and regions due to differences in socio economic characteristics of farmers and in geographical location of farms.
Besides, the benefits of technological advances in the form of technical efficiency and productivity gain may vary across the farms depending on farm characteristics, and the social, economic, political, and regulatory environment as well. Therefore, changes in productivity, technology, and technical efficiency overtime in case of small-scale farm operators may be different from that of larger and highly intensive commercial farm operators due to its limited access to finance, information, and poor farm management.
This study empirically investigated all of these issues based on farm level data collected from different regions during 2012-2018 on Bangladesh. The study used different parametric and non-parametric models for analyzing the issues including Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA), Meta-frontier DEA, Distance functions, principal component regression (PCR) and robust regression.
It is found that there is a positive agglomeration externality effect on production possibility frontier and a negative externality effects on technical efficiency. The study also reveals that technical efficiency varies significantly across the regions due to variation in the production environment, the individual producers’ ability to manage inputs and selection of species depending on local production environment.
Findings of this study in connection to management practices and managerial ability are that both of these affect aquaculture farms productivity and financial performance. Furthermore, the study finds that farmers follow more than one risk management strategies to manage a particular type of risks.
The study has also found that the overall productivity index and its components are increasing over time, but at a decreasing rate. The technology change effect has the largest impact followed by technical efficiency change, and the sampled farms are scale inefficient. Nevertheless, the convergence towards the technology frontier seems to level off due to a declining ability to minimize the efficiency change and technological change gaps over time. The results also show a larger disparity among the farm in recent year lowering the mean technical efficiency with a few farms driving the frontier outward and the average farms lagging behind.
Overall, the study has found evidences that difference in size of regional industry, production environment, managerial ability and management practices, and risk perception influence on efficiency, productivity, and profitability across the farms. Over the time, changes in technical efficiency, technology, and scale of operation influence productivity, and average farms are lagging behind the best practice farms.