Production Risk and Technical Efficiency of Tilapia Aquaculture in Bangladesh

Tilapia is a fast-growing fish that has huge potential for production in Bangladesh. Despite the impressive growth of the industry, production is highly volatile across farms and locations. Both output risk and/or inefficiency will lead to variation in production. While several studies have focused on either technical efficiency or risk, few studies have been conducted on the combined effect of production risk and technical inefficiency. By employing a stochastic production frontier model with flexible risk specification on cross-sectional data from 339 sample farms, this article quantifies the production variability of tilapia farming from two main possible sources: production risk and technical inefficiency. Furthermore, our 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 reduce production variation. Our main findings are that significant production risk and technical inefficiency exist in tilapia farming.