Do smallholder farmers’ perceptions of production risks impact cost efficiency? Evidence from Ghana

Abstract

Introduction The effect of production risks on food security in sub-Saharan Africa, has been increasingly compounded by climate change, pests, diseases, and market volatility. Effective risk management requires coordinated actions from farmers and policymakers. This study sought to examine the impact of farmers’ risk perceptions on cost efficiency. Methods This study surveyed 844 smallholder maize farmers across two agro-ecological zones in Ghana. We applied principal component analysis (PCA) to measure risk perception, a stochastic cost meta-frontier model to estimate cost efficiency under technology heterogeneity, and endogenous switching regression ESR to address self-selection bias. Results Farmers exhibited general cost inefficiency. However, those perceiving higher severity of production risks demonstrated significantly greater cost efficiency. Discussion The findings underscore the need to integrating farmers’ risk perceptions into policy design and production cost minimization strategies. Policymakers should leverage these perceptions to bolster food security amid rising risks.