Impact of environmental production conditions on productivity and efficiency: a case study of wheat farmers in Bangladesh

Environmental conditions significantly affect production, but are often ignored in studies analysing productivity and efficiency leading to biased results. In this study, we examine the influence of selected environmental factors on productivity and efficiency in wheat farming in Bangladesh. Results reveal that environmental production conditions significantly affect the parameters of the production function and technical efficiency, as well as correlates of inefficiency. Controlling for environmental production conditions improves technical efficiency by 4 points (p<0.01) from 86% to 90%. Large farms are more efficient relative to small and medium sized farms (p<0.01 and 0.05), with no variation among regions. Policy implications include soil fertility improvement through soil conservation and crop rotation, improvement in managerial practices through extension services and adoption of modern technologies, promotion of education, strengthening the research-extension link, and development of new varieties that have higher yield potential and are also suitable for marginal areas.