The impact of decoupled subsidies on productivity in agriculture: a cross‐country analysis using microdata

The decoupling of direct payments from production introduced in the reform of the Common Agricultural Policy is expected to make production decisions more market‐oriented and farmers more productive. However, ex‐post analyses of the productivity of farms have yet to uncover any evidence of a positive impact of the decoupling policy on farm productivity. Using Irish, Danish, and Dutch farm‐level data, we identify whether the decoupling policy has contributed to productivity growth in agriculture and farm product adjustment behavior. We find some evidence that the decoupling policy had significant positive effects on farm productivity and behavioral changes related to farm specialization.     

Cost and environmental efficiency of rice farms in South Korea

We examine cost and nutrient use efficiency of farms and determine the cost to move farms to nutrient‐efficient operation using Data Envelopment Analysis (DEA) with a dataset of 96 rice farms in Gangwon province of South Korea from 2003 to 2007. Our findings show that improvements in technical efficiency would result in both lower production costs and better environmental performance. It is, however, not costless for farms to move from their current operation to the environmentally efficient operation. On average, this movement would increase production costs by 119% but benefit the water system through an approximately 69% reduction in eutrofying power (EP). The average estimated cost of each EP kg of aggregate nutrient reduction is approximately one thousand two hundred won. For technically efficient farms, there is a trade‐off between cost and environmental efficiency. We also find that the environmental performance of farms varies across farms and regions. We suggest that agri‐environmental policies should be (re)designed to improve both cost and environmental performance of rice farms.     

Technical and scale efficiency of crop and livestock farms in Poland: does specialization matter?

The technical and scale efficiency of Polish farms is analyzed using data envelopment analysis. Efficiency differences are measured according to farm specialization, in crop or livestock, at two points in time during transition, 1996 and 2000. The efficiency results are reviewed in light of confidence intervals provided by bootstrapping. Livestock farms are found to be, on average, more technically and scale efficient than crop farms. Scale efficiency is high for both specializations. Technical inefficiency appears mostly to be due to “pure technical” rather than “scale” inefficiency, and thus attributable to inefficient management practices. The evidence suggests that the low‐educational attainment of people engaged in agriculture is one important reason for these inefficient practices. In 2000, 64% of livestock farms and 86% of crop farms were operating under increasing returns to scale. Improvements in the land lease legislation and changes to the policy support to farmers' pensions could stimulate the land market and remove the incentives to keep a fragmented operational structure.     

Irrigation water productivity in Cambodian rice systems

Knowledge of the marginal productivity of water is crucial for decisions about its allocation between uses, which is particularly important in the context of increasing competition for water. Using primary, plot‐level panel data, this article estimates the marginal productivity of water from supplementary irrigation in lowland rice systems in Cambodia, taking into account farmer and plot heterogeneity as well as self‐selection of supplementary irrigation. Our estimates indicate a range of elasticities for rice output with respect to water inputs of between 0.057 and 0.069 for wet season production, substantially lower than previous estimates based on either aggregate or trial data. We discuss the policy implications of these results, in particular with respect to the utility of demand management policies and the challenges they pose to the decentralization of water management to Farmer Water Users Groups.     

The firm size,farm size,and transaction costs: the case of hazelnut farms in Turkey

This study analyzes the effects of transaction costs on the size of hazelnut farms in Turkey. The study finds that higher land slope and higher variance of rain, as transaction‐cost‐increasing natural effects, lead to smaller hazelnut land holdings. High slope and weather variation can increase the costs of monitoring the laborers, make moving inputs or output up and down harder, limit the use of machinery, and reduce contractual performance of labor contracts. For farm production functions, land is a complex input with measurable interactions with nature. Contrary to common production theory approaches that take natural properties of land as given, the study develops a production function that incorporates natural properties, such as, slope and rain variance. The study utilizes two separate data sets for the estimations. The first data set explores the characteristics of hazelnut farmers, while the second one analyzes the regional characteristics of hazelnut farms.     

Production risk,risk aversion and the determination of risk attitudes among Spanish rice producers

Agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk. Risk attitudes in turn may be affected by certain socioeconomic characteristics of producers. Using 2004 survey data from a cross‐section of 130 Spanish rice farms, we estimate risk‐aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes. Our results show that farmers exhibit risk‐averse behavior and that risk attitudes are related to a series of socioeconomic characteristics. In particular, the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion, while age is found to have nonlinear effects on risk aversion. Off‐farm income, especially from nonagricultural activities, is found to reduce risk aversion. Neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences. Regarding the production technology, we find that land, labor, and fitosanitary products are risk‐reducing inputs, whereas capital, seeds, and fertilizer all increase risk.     

Nonfarm employment,agricultural intensification,and productivity change: empirical findings from Uganda

This article uses panel data from the Living Standards Measurement Study‐Integrated Surveys on Agriculture for Uganda to assess the farm‐level effects of nonfarm employment on agricultural intensification and productivity change. A sample selection model is used to account for both unobserved heterogeneity and potential simultaneity between agricultural production and nonfarm income. Results show that nonfarm employment can have differential impacts on farm technology intensity and productivity. Nonfarm income is found to have a positive impact on farm hired labor and improved seed intensity; a negative effect on on‐farm family labor use; and no significant impact on fertilizer, soil water management, and joint use of farm technologies. The econometric evidence also indicates that agricultural productivity declines as nonfarm income increases. Taken together, our findings reveal important trade‐offs between nonfarm employment and income and farm productivity growth under smallholder agriculture. The results indicated that targeted policies are required to reduce these potential trade‐offs between nonfarm employment and agricultural intensification and productivity change.     

The impact of soil conservation and output diversification on farm income in Central American hillside farming

This article analyzes the determinants of farm income among hillside farmers participating in natural resource management projects in El Salvador and Honduras. The farm income function was evaluated using a system of equations in which income is determined simultaneously by the farmer's decision to adopt soil conservation technologies and by the level of diversification (number of agricultural activities) on the farm. The database used comes from surveys administered to 678 beneficiaries of these projects during 2002. The econometric results suggest that all the variables related directly to land use (i.e., output diversification, soil conservation practices and structures, and the adoption of forestry systems) have a positive and statistically significant association with farm income. Also, farmers who own land enjoy higher farm incomes than those who do not. The results indicate that when investing in natural resource management projects, governments and multilateral development agencies should pay close attention to output diversification, land tenure, and human capital formation as effective instruments in increasing farm income.     

Incentives and moral hazard: plot level productivity of factory‐operated and outgrower‐operated sugarcane production in Ethiopia

We investigate the unique contractual arrangement between a large Ethiopian sugar factory and its adjacent outgrower associations. The only significant difference between the sugarcane production on the factory‐operated sugarcane plantation and on the outgrower‐operated plots is the remuneration system and thus, the incentives to the workers. We compare the productivity of these two production schemes using a cross‐sectional plot‐level data set. As sugarcane production depends on various exogenous factors that are measured as categorical variables (e.g., soil type, cane variety, etc.), we estimate the production function by a nonparametric kernel regression method that takes into account both continuous and categorical explanatory variables without assuming a functional form and without imposing restrictions on interactions between the explanatory variables. Our results show that outgrower‐operated plots have—ceteris paribus—a statistically and economically significantly higher productivity than factory‐operated plots, which can be explained by outgrowers having stronger incentives to put more effort into their work than the employees of the sugar factory.     

Technology and efficiency in a panel of Italian dairy farms: an SGM restricted cost function approach

This article employs a short‐term specification of the symmetric generalised McFadden (SGM) cost function capable of accommodating quasi‐fixed factors and variable returns. Temporary equilibrium and scale economies are investigated while maintaining the consistency of the estimated model with microeconomic theory and approximation properties. It also makes use of a two‐step procedure to estimate first the technology parameters and then time‐varying efficiency at farm level. No distributional assumptions are required on efficiency as we consider a fixed effect model. A balanced panel of Italian dairy farms during the years from 1980 to 1992 serves as the case study. The results suggest a rigid productive structure during the pre‐ and post‐quota period. Moreover, Italian milk producers are found to exhibit considerable excess capacity and rather low input technical efficiency.     

Economic versus environmental improvement potentials of Danish pig farms

This article demonstrates how economic and environmental improvement potentials of Danish pig farms can be estimated using Data envelopment analysis (DEA). To avoid some of the problems associated with the definition of undesirable outputs, environmental variables are included as nutrients applied with manure and nutrients removed with the crops. These environmental variables are combined with a series of economic variables, including the costs of fertilizer. Furthermore, subvector efficiency and a two‐step analysis are used in order to consider economic and environmental (technical) efficiency separately. The empirical results show considerable improvement potentials, especially on the environmental variables. Sensitivity studies validate that these results are robust to possible uncertainties in the measurement of the environmental variables.     

Farmer-to-farmer technology diffusion and yield variation among adopters: the case of improved cowpea in northern Nigeria

This article examines the magnitude and sources of yield variation among adopters of improved cowpea varieties in northern Nigeria promoted through farmer‐to‐farmer diffusion. The results reveal important efficiency differences between the lead farmers who have contacts with breeders and the follower farmers who get technology and information from the lead farmers. Differential adoption of the package of seed, insecticide, fertilizer, and recommended cereal‐cowpea cropping pattern provides much of the explanation for yield variation among adopters. The component often missing, and hence accounting for much of the yield variation, is the crop management technology relating to the cereal‐cowpea cropping pattern. No efficiency variation is attributed to the source of technology and information, such as whether improved cowpea was obtained from breeders or lead farmers. Technology source has a rather indirect influence on efficiency through its effect on package adoption where breeders promote greater package adoption among the lead farmers than the lead farmers do among the follower farmers. Possible ways of disseminating crop management technological information through the farmer‐to‐farmer technology diffusion are recommended to better exploit the yield and profitability potentials of improved cowpea varieties in northern Nigeria.     

Technical efficiency of Kansas arable crop farms: a local maximum likelihood approach

This study uses local maximum likelihood (LML) methods recently proposed by Kumbhakar et al. (2007) to assess the technical efficiency of arable crop Kansas farms. LML techniques overcome the most relevant limitations associated to mainstream parametric stochastic and nonparametric frontier models. LML allows deriving farm‐level frontier parameter estimates. The relevance of using localized estimates is evidenced by the observed heterogeneity in production technologies. Technical efficiency scores derived from the LML approach [0.905] are higher than those of the DEA model under CRS [0.808] and SFA [0.804] and close to DEA‐VRS [0.917] ratings. Deriving reliable information about farm efficiency performance is relevant to identify inefficient farms and define adequate policy and management strategies. The use of refined methods has thus important implications.     

Tenure security, resource poverty, public programs, and household plot-level conservation investments in the highlands of northern Ethiopia

Land degradation poses a serious problem for the livelihoods of rural producers. Furthermore, there is rarely enough private investment taking place to commensurate the scale of the problem. This article examines the role of tenure insecurity, resource poverty, risk and time preferences, and community‐led land conservation on differentiated patterns of household investment in land conservation in northern Ethiopia. We control for biophysical, household characteristics, market access conditions, and village level factors. Investments in soil bunds and stone terraces are specifically studied so as to capture the link between these various factors and the durability of conservation investments. We introduce the distinction between the determinants of the decision to invest and how much to invest in conservation. Regression results show that publicly led conservation programs seem to significantly stimulate private investment. A host of plot‐level variables and household perceptions of returns on conservation investments, expressed in terms of perceived improvements in land quality and increased crop yields, were found to be critical to the decision to invest and intensify soil conservation. The evidence on the significance of households' attitudes toward risk aversion suggests the important role of risk and the household's risk‐bearing capacity in the decision to intensify conservation measures. At the same time, tenure security indicators and households' resource endowments (resource poverty) had weaker effects in increasing willingness to invest and the level of investment made. The policy implications of these results point to the importance of agricultural research and extension efforts that target technologies which reduce household risk and poverty while enabling sustainable investments in conservation measures by individual households.     

Yield and income risk-efficiency analysis of alternative systems for rice production in the Guinea Savannah of Northern Ghana

Risk efficiency of rice grain yield and returns to farm operators' household resources generated from an improved short‐duration cover crop fallow system were compared with (traditional) natural bush fallow, and continuous rice‐cropping systems. The improved fallow system involved maintaining Calopogonium mucunoides, seeded into a natural bush fallow for 2 years before planting to rice. With no chemical fertilizer application, which reflects farmers' practice in the area, average grain yield for continuous rice (1,185 kg/ha) and the cropping sequence incorporating a natural bush fallow (1,175 kg/ha) did not differ, but were higher for the improved fallow system (1,304 kg/ha). This suggests that nutrient contribution from the leguminous cover crop made up for critical crop N requirements in the improved fallow. Stochastic dominance of grain yield distributions from the improved fallow system, relative to the other two cropping systems, was more dramatic with no N fertilizer application compared to treatments with 30 kg/ha N. Average returns were highest for the improved fallow system, followed by the natural bush fallow‐cropping system, and then continuous rice, under the no N fertilizer treatment regime. With 30 kg/ha N fertilizer, income risk efficiency was less clear (compared to treatments with no N fertilizer), especially between continuous rice and the improved fallow treatment, because of faster N mineralization effects on continuous rice. In contrast, the improved cover crop fallow system completely dominated the natural bush fallow treatment under both fertilizer regimes. Rice production systems that incorporated the leguminous cover crop fallow were superior to the natural bush fallow system, based on both grain yield and average farm income risk‐efficiency considerations.     

Investment in soil conservation in northern Ethiopia: the role of land tenure security and public programs

A double hurdle statistical analysis of 250 farms in the Tigray region of Ethiopia reveals different causal factors for soil conservation adoption versus intensity of use. Farmers' reasons for adopting soil conservation measures vary sharply between stone terraces and soil bunds. Long‐term investments in stone terraces were associated with secure land tenure, labour availability, proximity to the farmstead and learning opportunities via the existence of local food‐for‐work (FFW) projects. By contrast, short‐term investments in soil bunds were strongly linked to insecure land tenure and the absence of local food‐for‐work projects. Public conservation campaigns on private plots reduced adoption of both stone terraces and soil bunds. Whereas capacity factors largely influenced the adoption decision, expected returns carried more influence for the intensity of stone terrace adoption (measured as metres of terrace per hectare). More stone terracing was built where fertile but erodible silty soils in higher rainfall areas offered valuable yield benefits. Intensity of terracing was also greater in remote villages where limited off‐farm employment opportunities reduced construction costs. These results highlight the importance of the right kind of public interventions. Direct public involvement in constructing soil conservation structures on private lands appears to undermine incentives for private conservation investments. When done on public lands, however, public conservation activities may encourage private soil conservation by example. Secure land tenure rights clearly reinforce private incentives to make long‐term investments in soil conservation.     

Global rice trade competitiveness: a shift‐share analysis

Changes in country shares of global rice exports from 1997 to 2008 are analyzed using an econometric, shift‐share analytical framework. This framework estimates growth rates and disaggregates these rates of change into geographical structure effects and performance effects. The performance effect is further decomposed into two subeffects accounting for adaptation to changes in the geographical structure of the marketplace and a competitiveness effect. A restricted, weighted, two‐way fixed effects model is specified for estimating the geographical structure and performance effects. Results indicate a growing concentration among a few exporting countries in the global rice market, and the competitiveness effect is often significant. Government policies affecting rice trade and the competitiveness of trading partners are important factors for the shifts in rice trade patterns. In particular, Vietnam is an emerging, major player in global rice trade in competition with Thailand.     

How does land fragmentation affect off‐farm labor supply: panel data evidence from China

This article provides a deeper theoretical understanding of the linkages between land fragmentation and off‐farm labor supply in China, and investigates this relationship empirically in a more direct way than does the existing literature. Drawing upon a rural household panel data set collected in Zhejiang, Hubei, and Yunnan Provinces from 1995 to 2002, we estimate the effects in two steps. First, we estimate the effect of land fragmentation on labor productivity. Second, we estimate the effect of land fragmentation on off‐farm labor supply. The production function results show that land fragmentation indeed leads to lower agricultural labor productivity, implying that land consolidation will make on‐farm work more attractive and thus decrease off‐farm labor supply. However, the effect of land consolidation on off‐farm labor supply is not significant. One likely explanation for this result may be the potentially imperfect labor markets.