Asia-Pacific Journal of Regional Science

https://doi.org/10.1007/s41685-018-0092-2

ARTICLE

Efficiency and adoption of organic tea production:

Evidence from Vi Xuyen district, Ha Giang province,
Vietnam

Nguyen To The1 · Anh Nguyen Tuan1

Received: 13 February 2018 / Accepted: 9 July 2018

© The Japan Section of the Regional Science Association International 2018

Abstract
This paper considers two empirical models. Initially, a stochastic frontier analysis
is employed to investigate the technical efficiencies of tea growers in Vi Xuyen,
Ha Giang. The findings indicate that the average technical efficiency of organic tea
farmers in surveyed area was 65.2.1% which is lower than that of conventional tea
growers (70.1%). Furthermore, the average age of tea plant has negative effect on
technical efficiency of tea production, meanwhile, the remaining parameters have
positive effects on the technical efficiency. Secondly, binary logistic regression anal-
ysis is used to determine the influencing factors of the tea farmer’s choice on organic
tea production. The variables such as cultivation land, access to extension services,
experience of household’s head and especially contract farming have large influ-
ences on the decision of tea farmers. The marginal effects after logit of the explana-
tory variables are -0.01, 0.63, -0.05, 0.71, respectively.

Keywords Organic tea · Technical efficiency · Binary logistic function · Vietnam

JEL Classification C21 · D24 · Q12 · Q18

1 Introduction

Tea is the manufactured beverage most consumed globally, it is one of the oldest
beverages in the world Chang (2015). Tea is a perennial crop and the tea crop has
rather specific agro-climatic requirements that are only available in tropical and

We gratefully acknowledge the financial support from the Vietnam National Foundation for Science
andTechnology Development (NAFOSTED) under grant number 502.01-2018.13.

* Nguyen To The
tothenguyen@gmail.com
1
Department of Planning and Investment, Vietnam National University of Agriculture, Hanoi,
Vietnam

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subtropical climates. Tea has appeared in Vietnam for thousand years, recently,
tea growers in Ha Giang, Cao Bang, Lao Cai, Yen Bai has still cultivated hundred
year tea plant. Nowadays, tea plant is considered as an high economical plant
compared to other plants towards poverty alleviation as well as increasing income
for local farmers. Tea export of Vietnam increased both in quantity and value
with 5.1 and 2.1%, respectively compared to these in 2015 which reached to 1309
thousand tons, valued approximately 2.172 million USD (GSO 2015).
Wenner (2011) argues that the development of tea in Vietnam has a lot of
potential for great growth, however, this growth will come with a variety of criti-
cal challenges. The situation of tea cultivation and processing pointed out low
labor productivity, scattered cultivation area, low harvesting productivity that
causes the inefficiency of tea growers. Another challenge is the replacement of
old tea plants. With current rates of old tea plants that are still occupied roughly
50% of total production, change needs to be made if real growth is to be realized.
The old varieties have traditionally low yields and require high levels of chemi-
cal application, meanwhile, new varieties may able to provide higher yields and
innate pest resistance in some strains. However, Quang (2014) asserts that the
inefficiency of Vietnamese tea growers relies on their farming technique. Beside
the effects of experience, education and land of tea growers, the application of
organic farming effects significantly the technical efficiency of tea growers.
The term “organic farming” was coined by Paull (2006), out of his conception
of “the farm as organism”, to describe a holistic, ecologically balanced approach
to farming-in contrast to what he called chemical farming, which relied on
“imported fertility” and “cannot be self-sufficient nor an organic whole”. Organic
tea is certified tea, which is free of fertilizers, pesticides, and herbicides. The cul-
tivation process of organic tea, which relies on ecological processes and biodi-
versity, is based on sustainable practices. In recent years, Vietnamese tea growers
in general step by step has transferred their tea cropping areas from traditional
cultivation to organic farming. Nghia (2009) argues that the switch from conven-
tional to organic tea production would bring real environmental, health and eco-
nomic benefits for the country’s farmers and society as a whole. In particular,
the amount of agrochemical residue and waste produced by tea production would
be reduced. Farmers may also be able to enjoy a better livelihood as they could
command a premium price for their organic tea products. His study therefore rec-
ommends that organic tea production is the best method for farmers to adopt.
However, not all conventional tea farmers can immediately switch to organic tea
production because of various factors affecting this decision.
The remaining of the paper is organized as follows. Section 2 discuss the
potential determinants of technical efficiency, including factors which are related
to other crops but appear to be relevant to tea. Section 3 describes the data we
collected ourselves in Vietnam. Cross section data of 120 tea farming households
collected by our own through a survey questionnaire in 2016. Section 4 presents
the stochastic production frontier model applied to our data. Stochastic Produc-
tion Function (SPF) is used to determine the technical efficiency and the factors
influencing the technical efficiency between organic and non-organic tea produc-
tion. A binary logistic model estimation is employed to analyze the relationship

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between the key determinants and the adoption of organic tea production at farm-
household level. Finally, Sect. 5 concludes the study.

2 Literature review

2.1 Determinants of technical efficiency

Researches on tea production are however relatively scarce, and results obtained
from existing studies are very heterogeneous. We will limit our attention on stud-
ies concerning agriculture and, in particular, the tea sector. We believe that results
obtained for other crops can be reasonably applied to tea. In this section, we first
provide a review about the level of technical efficiency and then discuss its major
determinants reported by existing studies.
Reviews of technical efficiency estimation in agriculture using stochastic produc-
tion frontier can be found in Bravo-Ureta and Pinheiro (1993). This study reviewed
the frontier works applied to farm level data collected in developing countries. India
was the country that has received the highest attention and rice was the most stud-
ied agricultural product. The average technical efficiency computed from all the
reviewed studies is about 72%. The variables frequently used in these studies are
farmer’s education, experience, access to credit and farm size, etc. These variables,
except for farm size for which the effect is ambiguous, appear to have a positive
and significant effect on technical efficiency. The research of Hong and Yabe (2015)
also reviewed technical efficiency estimation in agriculture using stochastic fron-
tier production. In particular, this study reviewed the frontier function employed to
farm level data collected in Vietnam. The results revealed that the average output of
tea farms could be increased by 10.4% properly using the existing technology. The
average technical efficiency of the sample tea farms is about 89.6%. The variables
such as pesticide, labor and capital negatively affected tea yield. However, irriga-
tion water and types of chemical fertilizers such as nitrogen, phosphorous and NPK
showed a positive relationship with tea yield. The study demonstrated that impor-
tant factors having positive impact on technical efficiency level of tea production
are applying soil and water conservation technology, accessing extension services,
participating cooperatives and gender.
Wadud and White (2000) applied a translog model to survey data on rice farm-
ers in Bangladesh. Variables included in modeling technical efficiency are age of
farmers, land fragmentation, year of schooling, irrigation infrastructure and envi-
ronmental degradation. In a meta analysis of technical efficiency of agriculture in
developing countries, Thiam et al. (2001) used a Cobb Douglas production function
and found that crop variety does not seem to significantly affect technical efficiency.
Raphael (2008) found that technical efficiency of cassava farmers in south-eastern
Nigeria is on average about 77%. An additional finding is that farmer’s education,
experience, membership in a farmers’ association, credit, household size, improved
cassava variety and farm size are significantly related to technical efficiency whereas
age has no significant impact. Hossain et al. (2012) estimated a translog produc-
tion frontier for Bangladeshi rice crops and found that technical efficiency is around

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50%. Khai et al. (2008) and Khai and Yabe (2011) analyzed the efficiency of soy-
bean production in Vietnam and reported that the average technical efficiency is
around 82%. These studies showed that the most important factors having positive
impacts on technical efficiency are intensive labor in rice cultivation, irrigation, and
education. Technical efficiency is measured as the ratio between the observed output
to the maximum output, under the assumption of fixed inputs (Coelli and Fleming
2004). The stochastic frontier analysis is a helpful tool to estimate resource use effi-
ciency and to identify the determinants of organic and traditional tea production.
The literature on stochastic frontier production is abundant. Researchers on tea pro-
duction are however relatively scarce and results obtained from existing studies are
very heterogeneous especially organic tea production.
Besides, the comparison between organic and conventional farming practice in
term of efficiency has been studied by many researchers around the world, mean-
while, the study of efficiency and productivity of conventional and organic tea farms
has not been concerned appropriately leading a few of available research in that area.
Lansink et al. (2002) had employed data envelopment analysis to estimate technical
and input specific technical efficiency measures of conventional and organic farms in
Finland from 1994 to 1997. The outcome illustrated that the performance of organic
farms was averagely more efficient compared to their own technology but used a less
productive technology than conventional farms. Another research was undertaken
by ? To study the efficiency of organic Olive. The paper used a stochastic produc-
tion frontier and translog specification to determine that organic olive growing farms
performed a higher percentage of technical efficiency than did conventional farms.
Additionally, Mayen et al. (2010) compared the technology adoption and technical
efficiency of organic and conventional dairy farms in the United States then figured
out that the organic dairy technology was roughly 13% less productive and there was
a little difference in technical efficiency between organic and conventional farms
when technical efficiency is measured the appropriate technology.
Regarding organic tea production, Jayasinghe and Toyoda (2004) introduced a
stochastic frontier model to analyze the technical efficiency of organic tea small-
holdings in the mid country wet zone of Sri Lanka. The study results indicate that
there is great potential to increase production by 55% through efficient use of the
present technology. These results identify a significant relationship between com-
post application and labor on organic tea production. A significantly positive rela-
tionship is also found between technical efficiency and training of farmers. Large
numbers of vegetative propagated tea plants in the farm enhance the efficiency. The
characteristic crop diversification observed in the organic tea farming system has
significantly reduced the efficiency. Finally, a specific policy for the development of
the organic tea smallholding sector is suggested.
Concerning the variable of interest in our study, namely, agricultural extension
policy, although its effect is expected to have an intuitive sign, i.e., negative effect
on technical inefficiency (or positive effect on technical efficiency), confronting
with real data gives contrasted results. Seyoum et al. (1998), Ahmad et al. (2002)
and Lindara et al. (2006) found that various measures of agricultural policy (access
to policy services, training, number of contacts with agricultural policy officers,
etc.) can help improve technical efficiency. More precisely, Seyoum et al. (1998)

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investigated technical efficiency in maize producers in eastern Ethiopia, by compar-

ing farmers within the Sasakawa Global 2000 project (which involves better farming
practices) and farmers outside this project. The authors found that advice of policy
workers are beneficial to farmers within the project whereas they do not help farm-
ers outside the project to reduce technical inefficiency. Ahmad et al. (2002) studied
the technical efficiency of wheat producers in Pakistan and showed that having con-
tact with agricultural policy agents can help farmers raise their technical efficiency.
Regarding the study of Lindara et al. (2006) on the spice-based agroforestry sector
in Matale district, Sri Lanka, technical efficiency is shown to be increasing with the
number of farm visits by policy officers and the farmer’s participation to a training
class. Parikh and Shah (1994) estimated farm level technical efficiency is found to
be dependent upon levels of credit and education, farmers’ ages and the extent of
land fragmentation.
On the contrary, some studies showed that agricultural extension policy features
do not have any significant impact on technical efficiency and that, in some cases,
they can worsen technical inefficiency. For example, in Raphael (2008), the vari-
able for access to extension services does not have any significant effect on technical
efficiency for cassava production in Nigeria. Khai and Yabe (2011) used an agri-
cultural extension variable, which represents three main policies of the government
(preferential credit, land provision, and agricultural promotion). This variable can be
thought to encompass features of policy in Vietnam aiming at increasing the perfor-
mance of the agricultural system. The authors observed that agricultural policy does
not help farmers cultivate rice more efficiently.
The discussion so far suggests that technical efficiency of tea production in
Vietnam is not high. Moreover, based on the literature review, we can make some
hypotheses regarding the determinants of technical efficiency. Table 1 not only
reports generally ambiguous, estimating its effect on technical efficiency but also
represents the potential variables that be applied in the second empirical model.

2.2 Determinants of discrete model of organic tea production

The above researches only indicate the technical efficiency of farming households and
the factors affecting those technical efficiency, the choice of tea growers on organic
production is not concerned. Gardebroek (2002) investigates the choice between con-
ventional and organic production technologies for individual farmers. The model was
estimated on a panel data set of Duth dairy farmers for the period 1994–1999 using
a random effects probit specification. It appears that education, the size of the farm in
hectares and on farming selling of milk have a positive impact on the choice between
conventional and organic farming, whereas joint operation of the farm by father and
child, the size of the milk quota and profits in the previous period have a negative effect
on this choice. Age, renting a farm, the amount of animal feed produced on the farm
and the size of the premium do not have a significant effect on choice between conven-
tional and organic farming.
Meanwhile, Chepkulei (2013) figures out the determinants of market choice among
tea farmers in Kenya by using a probability model (binary logistic) to predict farmer’s

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Table 1 Description of the data and variables used in the empirical analysis
Variables Definition Nature

Land Land surface used in tea production (in m 2 ) Continuous

Labor Total man-hour employed in tea production Continuous
Production Total tea production (tons) Continuous
Experience Years of experience in tea cultivation of the household head Continuous
Education Education years of the household head Continuous
Age Years of the household head Continuous
TeaAge Average cultivation years of tea farm Continuous
Extension Household has been consulted by extension agents (one if yes, zero otherwise) Dummy
Forganic Cultivation of organic tea (one if yes, zero otherwise) Dummy
Contract Contract of selling tea products (one if yes, zero otherwise) Dummy
Minority Head of the household corresponds to a minority (one if Kinh, zero if other- Dummy
wise)

decision on market choice. The key descriptive findings were that farmers supplying
KTDA (Kenya Tea Development Authority) were on average older, less education, had
more land under tea and had larger families. Farmers selling to middlemen were gener-
ally younger, higher educational status, smaller family sizes. There was a significant
gate price differential with KTDA paying lower monthly price but offered bonus that
comes at end of financial year. Logit regression results predicted that institutional fac-
tors mainly promptness in payment, quality requirements and flexibility in collection of
green tea, and gate price predicted favorably a farmer’s decision to sell to middlemen. It
is recommended that KTDA should be more responsive to financial needs of the farm-
ers by reducing the period of bonus disbursement to not more than 3 months. Each
factory should be operated independently so that looses can be attributed to particular
factory management, this will increase competitiveness in the tea sub-sector.
In reality, tea plants in Ha Giang province were grown long time ago. Therefore, we
intend to discover the reason why tea farmers in surveyed areas cultivated organic tea
by combining two possible models into the research paper to figure out both the tech-
nical efficiency and its determinants of tea production as well as the factors affecting
the choice between organic and conventional tea production of farmers in Vi Xuyen
district, Ha Giang province. In the following section, we will explain the data and vari-
ables used for the empirical analysis.

3 Data and variables

A survey was carried out from June to August 2016 by our team in Vi Xuyen
district, Ha Giang province, Vietnam. The participants were randomly selected
from lists of farm households. We organized face to face interviews with the

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participants to provide information about their tea production of the previous

year. The average duration of each questionnaire lasted approximately 1 h and a
half. Both quantitative and qualitative data have been collected for a total samples
of 120 Vietnamese farm households.
As above mention in the first part of the research, tea cultivation in Vietnam
is mostly concentrated in the north of Vietnam especially in Ha Giang province
where the ancient Shan Tuyet tea plant has been grown long time ago. Accord-
ing to Vitas (2016), Vi Xuyen district was remarkably famous for tea production
with 3544 ha, therein, harvesting area was about 3376 ha, re-planting tea area was
168.8 ha. The average productivity of fresh tea leaves reached 3.87 tons/ha, total
output was 12,511 tons.
In these two empirical models, we employ 11 variables in total. Specifically, in
production function, output variable is dependent which is explained by cultivation
land, labor-hour. Another important input of tea production that is fertilizer was not
used in this study because organic tea producers did not use chemical fertilizer, oth-
erwise, conventional producers uses only chemical fertilizer. Therefore, this is genu-
inely incomparable between type and amount of input fertilizer. Besides, technical
efficiency of tea production is assumed to be influenced by the experience, age, edu-
cation of head of tea household, average age of tea farm, being a member of minor-
ity group, education and experience years of household’s head, access to extension
service and contract farming. Regarding choice analysis of tea farmers on cultivat-
ing organic tea, a binary logistic model is applied to determine how the decision of
organic or non-organic tea production influenced by education and experience of
household’s head, contracting farming, being a member of the minority group, aver-
age age of tea plants and access to extension services. All detailed variables expla-
nations were described in Tables 1.
The summary statistics of the variables are reported in Table 2. As our purpose to
seek whether the existing the difference between organic and conventional tea farm-
ing practice in term of technical efficiency. We managed to pool our data separately.
The total yield of tea in 2016 of organic was about 2104 tons averagely, meanwhile,
conventional farming resulted in slightly higher amount (2091 tons) with a stand-
ard deviation of 1143 and 1585, respectively. This figure indicates the large vari-
ability in production among the farmers. Average cultivation area for organic tea
was about 7024 m2 per household which was significantly smaller than conventional
ones (11,275 m2). In contrast, the mean quantity of labor-hour employed in organic
tea production (planting, caring, harvesting...) was remarkably higher than that of
conventional tea production (68.9 > 50.6). Importantly, although organic tea farm-
ers were 3 years old older than conventional tea farmers in average, the tea organic
farming experience of the farmers was lower than conventional farmers because the
organic tea farming is newly introduced in Vietnam approximately 20 years ago.
The collected data include 62 organic tea producers and 58 conventional tea grow-
ers. A dummy variable for organic tea is then defined to check whether the tea farmers
decide to cultivate in organic method (Djokoto 2015). Information of tea consumption
with or without contract farming is also recorded. Dube and Mugwagwa (2017) argues
that tobacco contract farming in Zimbabwe had effect on technical efficiency. The data
show that the organic producers in our sample prefer to sell their products with contract

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Table 2 Descriptive statistics for the sample (120 farms)

Variables Organic sample (n = 62) Conventional sample (n = 58)
Mean Std. dev. Max Min Mean Std. dev. Max Min

Production 2104.2 1143.1 7500 980 2091.2 1585.1 9200 190

Land 7024.2 4487.1 30,000 2500 11,275.8 6384.3 40,000 1000
Labor 68.9 23.5 151.5 30 50.6 12.9 80 4
Experience 13.5 5.2 35 5 15.5 8.4 35 5
Education 3.0 3.6 9 0 5.1 4.4 12 0
Age 42.5 10.8 84 24 38.5 9.2 66 24
TeaAge 14.1 4.5 35 10 17.5 7.5 36 5
Extension 0.838 0.371 1 0 0.344 0.479 1 0
Contract 0.639 0.487 1 0 0.189 0.395 1 0
Minority 0.338 0.709 1 0 0.017 0.131 1 0

compared to conventional farmers. Initially, during the survey time, we observed the
illogical relationship between experience and age of tea plants of household’s head,
however, in Vi Xuyen district, tea farm is considered as a type of heritage from previ-
ous generation, almost tea farmers were inherited from their parents. Finally, most of
minority people grow organic tea, meanwhile, Kinh ethnic people preferred to do con-
ventional tea farming practice.

4 Empirical models and estimation results

4.1 Technical efficiency of tea production

The concept of SPF was difined by Aigner et al. (1977) and Meeusen and van
Den Broeck (1977). We employ the following SPF in this study. The output gi of tea
producer i, i = 1, 2, ..., l is subject to random shocks vi and a degree of technical effi-
ciency ni. The SPF can be defined as
( ) ( )
gi = f xi ;𝛽 exp vi − ni , i = 1, 2, ..., l, (1)
using log-transformation to (1), we have
( )
ln gi = ln f xi ; 𝛽 + vi − ni . (2)
We examine that vi is a random error term assumed to be independently and identi-
cally distributed N(0, 𝜎v2 ), which captures random variation in output due to factors
beyond the control of producers.
The one-sided error term corresponding to technical inefficiency of farm i, ni
(ni ⩽ 0, ∀i), is assumed to be independently distributed N(0, 𝜎n2 ).
Thereafter, in order to compute technical efficiency, we need to estimate param-
eters from model (2) which can be performed by maximum likelihood. The log-like-
lihood of this model is

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n
� � �
� 𝜏
ln L = −0.5 ln(2𝜋) − ln 𝜎 − ln Φ √
i=1 𝜎 𝜌
�� (3)
(vi − ni ) + 𝜏 2
� � �
(1 − 𝜌)𝜏 − 𝜌(vi − ni )
+ ln Φ − 0.5 ,
{𝜎 2 𝜌(1 − 𝜌)}1∕2 𝜎

where 𝜌 = 𝜎n2 ∕𝜎 2.
For the estimation, we need to specify the functional form for f (xi ;𝛽). It normally
corresponds to the Cobb–Douglas and translog function. Futhermore, as in Battese
and Coelli (1995) and afterwards in Kompas et al. (2012), we can indicate a condi-
tional mean model for ni as the following equation
ni = o�i 𝛿 + 𝜔i , (4)
o′i
where is a vector of explanatory variables, 𝛿 is a vector of parameters to be esti-
mated, and 𝜔i is a random statistical noise as N(0, 𝜎n2 ) introduced to capture events
beyond the control of farmers. In this case, we replace 𝜏 in the previous expressions
(3) by o′i 𝛿 . The absence of technical inefficiency is characterized by 𝜌 = 𝛿 = 0. The
test may be implemented by a likelihood ratio test whose correct critical values were
argued in Kodde and Palm (1987).
We firstly use the likelihood-ratio test to choose which production function is the
most suitable for modeling conventional tea production. The two possible produc-
tion functions are Cobb–Douglas (null hypothesis) and translog (alternative). The
test statistic is 8.64, which is higher than the critical value of the 𝜒 2 (3) distribution
at the 5% level (7.82), leading to rejection of the Cobb–Douglas function by apply-
ing translog specification. For organic tea production, the two possible production
functions are Cobb–Douglas (null hypothesis) and translog (alternative). The test
statistic is 0.01, which is higher than the critical value of the 𝜒 2 (3) distribution at the
5% level (7.82), leading to rejection of the translog function.
Specifically, the production structure for the ith conventional and organic tea
farms has the following single-output multiple-input translog production frontier
∑ ∑∑
ln gi = 𝛽0 + 𝛽j ln xij + 0.5 𝛽jk ln xji ln xki + vi − ni ,
j j k

where
∑
n i = 𝛿0 + z�mi 𝛿m + 𝜔i .
m

The subscript i = 1, 2, … , l denotes organic and conventional farms; j, k = 1, 2, … , J

stand for inputs used (cultivation land, used labor-day, organic cultivation and

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Table 3 Estimation of the Variables Conventional tea pro- Organic tea production
production function for tea duction (CTP) (OTP)
production
Coefficient Std. error Coefficient Std. error

Constant − 15.753∗∗ 5.457 3.073∗∗∗ 0.675

lnLand 2.766∗∗∗ 0.642 0.588∗∗∗ 0.063
lnLabor 4.081∗∗ 1.387 − 0.049 0.065
lnLand × lnLabor − 0.494∗∗ 0.163 – –
∗ ∗∗ ∗∗∗
, , mean for significance at the 10%, at the 5% and at the 1%
level, respectively

contract farming); and m = 1, 2, … , M are the farm-specific efficiency related vari-

ables (access to extension, experience, education of household’s head, average tea
age, being a member of minority group).
By using the translog model, we test for absence of technical inefficiency, which
corresponds to the null hypothesis H0 ∶ 𝜌 = 𝛿 = 0. We observe that the distribution
of the likelihood ratio test statistic is not standard under the null hypothesis. We
can however use the correct critical values provided by Kodde and Palm (1987). As
the computed value of the test statistic is 79.55, much higher than the 5% critical
value of the 𝜒 2 (7) distribution under the null (14.06), we can therefore reject the
null hypothesis and conclude that inefficiency exists in the tea production. Beside,
by using the Cobb Douglas model with organic tea production, the computed value
of the test statistic is 44.38, much higher than the 5% critical value of the 𝜒 2 (7)
distribution under the null (14.06), we can therefore reject the null hypothesis and
conclude that inefficiency exists in the tea production.
Table 3 represents the coefficients of the frontier translog frontier production
model. Land, labor and organic cultivation have significant positive effects on the
production. The elasticity of land and labor of conventional tea is significantly high
at 2.766 and 4.081, respectively. The result is also compatible with that of Basnay-
ake and Gunaratne (2002) and Nguyen-Van and To The (2016). Meanwhile, the
elasticity of land of organic tea is only 0.588. But the interaction terms between land
and labor of conventional tea is negative which is similar to the findings of Taraka
et al. (2012) and Castiglione (2012).
The Table 4 represents estimation results relative to the determinants of the
technical inefficiency associated to the translog production function of conven-
tional tea farms and stochastic production function of organic tea farms. Regard-
ing conventional tea, the estimated results are shown that experience, education
household’s head have effects on technical inefficiency of conventional tea pro-
duction. This finding is similar to the study of Hong and Yabe (2015). Mean-
while, access to extension service and experience of household’s head affected
remarkably to technical efficiency of organic tea production. The negative effect
means above variables can lead to increase the technical efficiency. According
to Table 4, average age of tea plants in Vi Xuyen shows that if the age of tea
increases the technical efficiency reduces proportionally, this is the reason why

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Table 4 Determinants of Variables Conventional tea Organic tea production

technical inefficiency in tea production (CTP) (OTP)
production, translog model
Coefficient Std. error Coefficient Std. error

Constant − 0.326 0.203 0.837∗∗∗ 0.235

Extension − 0.115 0.102 − 0.296∗∗∗ 0.065
Experience − 0.011∗ 0.005 − 0.036∗∗∗ 0.007
Education − 0.014∗ 0.007 − 0.009 0.007
Age 0.003 0.005 0.001 0.001
TeaAge 0.048∗∗∗ 0.006 0.019∗ 0.008
Contract 0.077 0.127 0.073 0.052
Minority 0.356 0.308 0.066 0.053
ln(𝜎 2 ) − 2.621∗∗∗ 0.185 − 3.651∗∗∗ 0.185
inverse logit of (𝜌) − 7.833 7.588 0.463 1.749
𝜎u2 0.000 0.000 0.016 0.012
𝜎v2 0.073 0.013 0.010 0.010
𝜎2 0.073 0.013 0.026 0.005
𝜌 0.000 0.003 0.613 0.414
∗ ∗∗ ∗∗∗
, , mean for significance at the 10%, at the 5% and at the 1%
level, respectively

Table 5 Summary statistics for technical efficiency

Variables Conventional sample (n = 58) Organic sample (n = 62)
Mean Std. dev. Max Min Mean Std. dev. Max Min

Technical efficiency 0.701 0.221 0.999 0.308 0.652 0.128 0.923 0.426

the local authority has been encouraging tea farmers to re-grow their tea plant or
switch the old tea varieties to high productivity plants.
The variables minority have no effect on tea production efficiency. Indeed, the
study of Ali and Jan (2017) mentioned that being a member of a minority group
has no significant effect on technical efficiency that concluded in the research.
However, in our study, because the local authorities played an significantly
important role that they encouraged the tea farmers to cultivation following the
organic farming procedure by establishing extension class. Besides, the farming
contract also has no effect on technical efficiency as we supposed.
We also compute the distribution of technical efficiency for our data as
described in the previous section. Table 5 provides a summary of the distribution
of technical efficiency of both conventional and organic tea production. Organic
technical efficiency is relatively lower than conventional tea which is comparable
to the results of Lansink et al. (2002) and Mayen et al. (2010).

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1
.8
Technical efficiency of CTP
.6
.4
.2

0 20 40 60
Observation

Fig. 1 Technical efficiency of conventional tea production

In summary, our results are quite inversely comparable to those estimated by the
previous frontier studies in tea sector. Madau (2007) argues that the overall aver-
age level of technical efficiency computed is 90.2% for conventional and 83.1% for
organic practices. Specifically, the average technical efficiency of tea organic pro-
duction is nearly 65.2%, meanwhile, that of conventional tea farming is only 70.1%.
That finding is also indicated from the study of ? Tzouvelekas et al. (2001). The
average technical efficiency is still low in both farming methods indicating that there
is considerable space for improvement in the utilization of their inputs.
The distribution of technical efficiency is further illustrated in Figs. 1 and 2. Spe-
cifically, technical efficiency ranges from a minimum of 42.6% (30.8%) to a maxi-
mum of 92.3% (99.9%) in organic (conventional) farms.

4.2 The choice of organic tea production

In economics, regarding the theory of qualitative choice analysis of Train (1986), dis-
crete choice models, or qualitative choice models, describe, explain, and predict choices
between two or more discrete alternatives, such as entering or not entering the labor
market, or choosing between modes of transport. Such choices contrast with standard
consumption models in which the quantity of each good consumed is assumed to be a
continuous variable. In the continuous case, calculus methods (e.g., first order condi-
tions) can be used to determine the optimum amount chosen, and demand can be mod-
eled empirically using regression analysis. On the other hand, discrete choice analysis
examines situations in which the potential outcomes are discrete, such that the opti-
mum is not characterized by standard first order conditions. Techniques such as logistic
regression and probit regression can be used for empirical analysis of discrete choice.

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Asia-Pacific Journal of Regional Science

Fig. 2 Technical efficiency of

.9
organic tea production

.8
Technical efficiency of OTP
.6 .5
.4.7

0 20 40 60
Observation

In our research, we intend to use the discrete choice models in form of binary logit.
We consider the case where the response gi is binary response variable, assuming only
two values that for convenience we code as one or zero. Hence, we can define
{
1 if the farmer grows organic tea,
gi =
0 if the farmer grows conventional tea.

x = (x1 , x2 , … , xi ) be a set of explanatory variables which are dummy variables

(contract farming, access of extension, distance from home to farm) and continu-
ous variables (cultivation land, educational years, experience years of household’s
head).
To analyse the adoption of organic tea production in Vi Xuyen, Ha Giang, we
employ the following logit model (see, Amemiya 1981; Maddala 1991):
g∗i = xi 𝛽 + 𝜀i , (5)
where g∗i is
a latent variable which represents the net utility corresponding to organic
tea production compared to conventional tea production. We observe the decision
of tea producer i, which is a binary variable, i.e., gi = 1 if producer i adopts organic
tea production and gi = 0 if (s)he selects the traditional production. The adoption
decision depends on producers’ characteristics and other control variables, repre-
sented by xi , and an unobserved random factor 𝜀i . Due to two contemporary farm-
ing methods appeared in research area, we decide to undertake the analysis of the
choice of organic tea production to determine the factors influencing the decision by
employing binary logistic model. We adopt the logit specification with the following
probability

exp(xi� 𝛽)
Pr(gi = 1 | xi ;𝛽) = , (6)
1 + exp(xi� 𝛽)

and the corresponding log-likelihood function

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 Asia-Pacific Journal of Regional Science

Table 6 Estimation of the logit Variables Coefficient Std. error Marginal effect Std. error
model for tea production
Contract 4.196∗∗∗ 1.072 0.755∗∗∗ 0.099
Experience − 0.265 ∗∗ 0.079 − 0.063 ∗∗∗ 0.017
Education − 0.077 0.093 − 0.018 0.022
Extension 3.318∗∗ 0.967 0.679∗∗∗ 0.131
TeaAge 0.044 0.072 0.011 0.017
lnLand − 2.445∗∗ 0.852 − 0.851∗∗ 0.205
Intercept 22.552∗∗ 7.024 – –

n
∑ { [ ]}
ln L = 𝟏(gi = 1) ln Pr(gi = 1 | xi ; 𝛽) + 𝟏(gi = 0) ln 1 − Pr(gi = 1 | xi ; 𝛽) ,
i=1
(7)

where 𝟏(.) is the indicator function of producer’s choice.

Table 6 reports estimation results (coefficients and marginal effects) of the logit
model concerning the choice of organic tea production.1 This table shows that the
contract farming and access to extension service have positive effects on the deci-
sion of household’s head for organic production which are also represented in the
studies of Arouna et al. (2015) and Mubanga et al. (2015), meanwhile, the culti-
vation land and experience years of household’s head affects negatively whether
household’s head decides to produce towards organic farming method. Indeed, the
surveyed old tea farmers who possess the long experienced years of tea cultivation
are unlikely to transform the conventional method to organic cultivation.
Specifically, the results in the Table 6 show that 63% probability of household’s
head accessing to extension service decides to cultivate organic tea compared
to those who do not have opportunity to access extension services. Similarly, 1%
increase in cultivation land affects the probability of cultivating tea towards organic
farming method by 1%. Furthermore, the role of farming contract is remarkably
important to tea farmers. 71% probability of tea farmers owning contract farming
decides to cultivate organic tea compared to those who do not. This result is simi-
lar to the study of Adebayo and Oladele (2013). Finally, 1% increase in experience
years of household’s head leads to 5% decrease of probability of applying organic
tea production. This result is also unconsistent to the study of Adebayo and Oladele
(2013). Besides, the variables education in the binary logistic model are non-signifi-
cant. This result is similar to the study of Adesina and Chianu (2002).
The predicted probability of household’s choice on tea organic production is
estimated from above logistic function. The distribution function is employed to

1
It is well known that the marginal effect of explanatory variable xk on adoption probability is given by
𝜕p∕𝜕xk = p(1 − p)𝛽k with p ≡ Pr(gi = 1 ∣ xi ;𝛽). Note that the marginal effect of a continuous explanatory
variable represents changes in the dependent variable when the explanatory variable increases by one
unit.

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Asia-Pacific Journal of Regional Science

1.00
0.75
Sensitivity/Specificity
0.50
0.25
0.00

0.00 0.25 0.50 0.75 1.00

Probability cutoff
Sensitivity Specificity

Fig. 3 Probability of household’s choice on tea organic tea production

describe the allocation of the probability of household’s choice on tea organic pro-
duction shown in Fig. 3.

5 Conclusion

Our research underlines that conventional (organic) tea production in this region
achieves relatively low efficiency at 70.1% (65.2%). The cultivation land and labor-
hour have significantly large effects on conventional tea production, meanwhile,
labor-hour has no significant effect on organic tea production. Given same technol-
ogy, the average technical efficiency is still low in both farming methods indicating
that there is considerable room for improvement in the utilization of their inputs.
It was observed that among different factors included in our model, access to
extension services, experience, education of household’s head and average year-old
of tea plant can influence technical efficiency. Concerning access to extension ser-
vices and education, short training course and extension services enhancing may be
the possible solutions to increase the technical efficiency of tea production in sur-
veyed area. Average age of tea in Vi Xuyen shows that if the age of tea increases
the technical efficiency reduces, this is the reason why the local authority has been
encouraging tea farmers to re-grow their tea plant or switch the old tea varieties
to high productivity plants. However, one of our research limitation is that tea is a
long-term plant so the estimation in one year may not provide sufficient recommen-
dation to stop or continue produce tea leaves.
Regarding the choice of tea farmers between organic and conventional farming
methods, we figure out that cultivation land, access to extension services, experi-
ence of household’s head and especially contract farming have large influences on
the decision of tea farmers between organic and conventional farming methods.

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 Asia-Pacific Journal of Regional Science

However, experience of household’s head has negative effect on the choice of

organic tea production. To conclude, the organic cultivation of tea farming in Vi
Xuyen district should be encouraged to replace the conventional method due to the
higher technical efficiency of production as well as the access to extension and con-
tract farming.

Acknowledgements We gratefully acknowledge the financial support from the Vietnam National Foun-
dation for Science and Technology Development (NAFOSTED) under Grant Number 502.01-2018.13.

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