Maximum Likelihood estimates of Stochastic Cost Frontier Function: An Application to the Maize farming and Hypothesis testing

Abstract

This paper uses maximum likelihood estimate of the half normal stochastic cost function to investigate the cost inefficiency among 100 maize farmers. Results indicates that Cobb Douglas cost frontier function parameter and are significant at 1% level. The Maximum likelihood parameter estimation indicated a positive relationship and significance at 1% level for seed, Manure, plant protection chemicals, labour, machinery and irrigation. Estimation of inefficiency model indicates that older farmers in range of 50-60 years are cost efficient than younger ones of 35-49 years. The estimated gamma parameter of 99% in the study area reveals the variation in the total cost of production of maize. Parameter estimation is done using Frontier 4.1. Hypothesis test shows there is significant relationship between maize output and input