Determinants of Technical Efficiency and Income Inequality of Food Vending as a Family Business in Southwest Nigeria

Abstract

This study examines the determinants of technical efficiency (TE) and income inequality of family business in southwest Nigeria. Data were obtained from primary source using structured questionnaire and interview schedule. A multi-stage sampling technique was employed in selecting 120 respondents for the study. Analyses were carried out using descriptive statistics, Gini coefficient and Lorenz curve as well as the stochastic frontier production function models. The results revealed that experience, educational level, household size and method of processing were the main determinants of TE of the respondents. Results further showed that food vending was in Stage II of production surface as shown by the returns to scale (RTS) of 0.776. The variables such as cost of raw materials, labour, operating expenses, depreciation cost on equipment and duration of the business were effectively allocated and used, which was also confirmed by the estimated coefficient value of each variable between zero and unity. The technical efficiency of food vending also varied between 0.44 and 0.69 with a mean of 0.52. However, the analysis of inefficiency model revealed a positive response of age factor. This implies that age factor led to decrease in TE of food vending in the study area. Also, the result of the Gini coefficient (0.58) indicated the presence of income inequality among the food vendors which was also affirmed by the Lorenz curve. The study therefore concludes that experience, educational level, household size, age factor and processing method were the main determinants of technical efficiency and uneven income distribution among the food vendors in the study area.