Economic literacy as a factor affecting allocative efficiency

[摘要] English: The main objective of this study was to explore the relationship between economic literacy and allocative efficiency of small-scale producers in South Africa. The study was conducted in Eksteenskuil, where small-scale producers export raisins via the fairtrade initiative. Data regarding production inputs and their relative prices was gathered by means of a structured questionnaire survey. The allocative efficiency of farmers was calculated by means of cost efficiency, using a mathematical linear programming technique called Data Envelopment Analysis (DEA). The inputs that were used to calculate the respondents' cost efficiency were fertiliser in the form of nitrogen, phosphate and potassium, labour, and fuel. It was hypothesised that economic literacy of individuals will have an effect on the ability of the producers to allocate their resources efficiently. The economic literacy of respondents was measured by means of proxy variables presented in the questionnaire. The economic literacy variables were regressed on cost efficiency by making use of the Tobit Regression Model since the dependent variable is bounded from above. The results from the DEA showed substantial inefficiencies among the small-scale raisin producers of Eksteenskuil, indicating that a significant capacity for cost efficiency improvement exists. By improving cost efficiency of producers, profit of producers will also increase. Economic literacy of raisin producers was measured to be below average. The total economic literacy score of respondents was found not to have a significant effect on their cost efficiency. However, some of the individual proxies for economic literacy were found to influence cost efficiency. Economic literacy questions were divided into two groups. The applied economic concept group: where respondents needed to think about the question, exhibit knowledge and make a rational decision. And the comprehension economic concept group: where respondents' knowledge on economics surrounding their farms, was tested. Interestingly, only questions from the applied economic concept group were found to have a statistically significant effect on the cost efficiency of respondents. Socio-economic factors of respondents were further measured in order to understand the characteristics associated with higher economic literacy levels of respondents. The hypothesised socio-economic factors were regressed on the statistically significant economic literacy questions found in the Tobit Regression Model. A Probit Regression Model and an Ordinary Least Squares (OLS) Regression Model were used to determine the effect of socio-economic factors on specific economic literacy questions. Most of the factors that were statistically significant in influencing economic literacy, relate to activities undertaken by the farmers to increase human capital. Other factors that were found to contribute to economic literacy, relate to farm specific factors like farm size and specialisation. The results show that economic literacy does affect the decision-making ability of individuals when it comes to the allocation of production inputs. Cost inefficiencies can be improved by improving the economic literacy of respondents. One of the important ways to improve economic literacy of smallscale producers is by simplified, goal-oriented, practical training related to the individuals' specific farming practices.

[发布机构] University of the Free State