EFFECT OF SOCIAL FACTORS IN STOCHASTIC FRONTIER PROFIT OF ORGANIC RICE FARMING IN BOYOLALI

Kusnandar, Ignatius Suprih Sudrajat, Supriyadi, Endang Siti Rahayu

Abstract: This research explored about the profit of organic rice farming system that influenced by social factors with stochastic frontier Cobb-Douglas profit function and MLE (Maximum Likelihood Estimation). The observation was made at farmer groups namely Pangudi Raharjo and Pangudi Boga in Dlingo Village, Mojosongo, Boyolali, Central Java, Indonesia. Stochastic frontier method is equation model to estimate the parameters of the factors that will affect the level of profit efficiency in order to be close to the maximum (frontier). In this model, the factors that affecting the profitability and the factors causing
the profit inefficiency of organic rice farming can be seen. This model was called composed error model because the error term consists of two components, namely the external factor/ errors caused by factors that can’t be controlled by the farmers (V1) and internal/ errors caused by factor that can be controlled by the farmers (U1). Error due to internal factors (U1) is composed of economic and social factors. This study elaborated the effects of social factors on inefficiency in the profit of organic rice farming system. As the result, the most dominant social factor was management which followed by frequency of participation in training, the role of institutions/ associations, frequency of participation in counseling, and the age of the farmers.

Keywords: Boyolali; management; maximum likelihood estimation; organic farming; profit function

Date published: 2017-09-08