Abstract:
This paper investigates the effect of labor out-migration and receipt of remittances on the technical
efficiency of tea production using a sample of 200 tea smallholders in Ratnapura and Kalawana
divisional secretariat divisions of Sri Lanka. A stochastic production function is estimated to evaluate
the effects of migration, remittances and prominent characteristics of migrants on the mean green tea
output and levels of technical efficiency. Results reveal that remittances have positive and significant
effect on tea production. The inefficiency model indicates that amount of remittances sent and the
education level of migrants have significant effects on deceasing inefficiency. However, duration of
migration and age of migrants are shown to increase the inefficiency. This could be due to the fact that
they are permanent migrants. The average technical efficiency of green leaf production of migrant
smallholders is 77%, which is 15% higher than that of non-migrant smallholders. Overall, the findings
suggest that the efficiency of allocation of inputs in green leaf production can be improved by using
remittances to make more timely purchases of inputs and hired labor.
