PROBLEMS OF INVESTMENT FOR TECHNOLOGICAL ADVANCE: THE CASE OF INDONESIAN RUBBER SMALLHOLDERS

The Indonesian rubber case illustrates major problems of technological advance where perennials are cultivated by small farmers. Despite the availability of new and socially profitable technologies, farmers have not shifted from traditional methods owing to credit and information constraints and to high private time-preferences. Some form of public assistance by the state is required if this shift is to take place. Possible Indonesian government approaches to encouraging improvement are discussed, and the currently favoured ‘focus’ strategy of capital and management-intensive development in large co-ordinated blocks is compared with the ‘dispersal’ strategy of attempting to spread government assistance more widely according to the initiative of individual producers. These and other alternative strategies are conceptualised as points on a ‘meta’ production function envelope, portraying the transition to higher inputs of added capital per hectare. The dispersal strategy employs a less capital-intensive intermediate technology, which may be adopted more easily by traditional farmers in the first instance. It may then be used as a base for moving up the learning ‘gradient’ to a higher technological level. It is shown that a major constraint on government acceptance of the dispersal strategy is lack of knowledge about its probable rate of diffusion. It is thus argued that further studies should be made of this aspect. The results of such work would then enable policies to be geared more optimally to resource endowments and social goals.     

CHANGE,ADJUSTMENT AND THE ROLE OF SPECIFIC EXPERIENCE: EVIDENCE FROM SRI LANKAN RICE FARMING*

Human capital comprising various components, such as different types of training, experience and skills, influences the capacity of economic agents to adjust to changing environments. We distinguish between formal education, general experience and various types of specific experience as determinants of adjustment to disequilibria in agriculture and demonstrate that their relative importance varies according to the nature of the changes facing the farmers. The results provide strong support for the importance of land-specific experience even in 'modernising' situations.     

COMPARATIVE EFFICIENCY OF RICE FARMS IN CENTRAL LUZON,THE PHILIPPINES

The purpose of this paper is to estimate a bias-free agricultural production function with a view to examining efficiency differences among small rice farmers. Simultaneous equation bias is avoided if we assume that farmers maximise expected profits; specification bias, which commonly occurs when a management input is omitted from such functions, is circumvented by introducing farm-specific dummy variables into a combined cross-sectional and time-series data set. Applying this model to data for 32 Philippine rice farms between 1970 and 1979, rather small production-elasticities are obtained for the conventional inputs and an efficiency ranking of the farms is presented. Second stage analysis shows that differences in soil type, land tenure, education and access to credit are important factors explaining these efficiency differences.     

Corporate governance and default prediction: a reality test

Default prediction has commanded the attention of researchers for at least 50 years. This paper addresses several testable hypotheses regarding the relations between corporate governance and default prediction. We employ the conventional logistic regression to provide empirical evidence from U.S. default data over the period of 2000 to 2015. Empirical results are consistent with the following notions: First, default firms are associated with high ownership concentration, low shareholder rights, low financial transparency and disclosures, and less board effectiveness. Second, in-sample and out-of-sample tests support the incremental contribution of corporate governance information on default prediction, when compared with the models involving just financial information.     

Structural Change and its Impact on Traditional Agricultural Sectors of Rapidly Developing Countries: The Case of Natural Rubber

Rapid structural change is now a major feature of several Southeast Asian economies. It generally involves greatly expanded exports of certain commodities and manufactures accompanied by a large growth in services, and poses serious difficulties for traditional labour-intensive sectors. One important sector affected in this way is that producing natural rubber in Malaysia, Indonesia and Thailand. The difficulties mentioned occur through both “resource pull” effects - which are especially important in raising real wages, and “spending” effects - which tend to lead to an appreciation of the real exchange rate. These effects, and the problems arising from them, are examined and compared for each of the rubber sectors above. While changes of this nature call for diminution in the size of traditional sectors, there is also a need to improve economic efficiency, notably by adopting new technology more appropriate to the emerging resource price configuration, and by moving to an agriculture where off-farm employment and other linkages are increasingly significant. Such adjustment may be both helped and constrained by institutional factors and official policies, which accordingly require careful review. These crucial policy issues, and the degree to which necessary adjustments have been made, are investigated for the rather different contexts in each of the three natural rubber-producing countries. The analysis is thought to have wider relevance for other developing countries with traditional agricultural sectors.     

Measuring and Explaining the Impact of Productive Efficiency on Economic Development

A limitation of most empirical cross-country studies that focuson determinants of GDP or GDP growth is that they fail to distinguishexplicitly between inputs used in production and conditionsthat facilitate production. For example, physical capital, humancapital, and labor are production inputs, whereas the qualityof institutions, macroeconomic stability, and market qualityare conditions that facilitate production. This article takesthis distinction seriously and uses a stochastic frontier approachto study factors affecting economic performance. A panel dataset of 71 countries for the 1980–98 period is used toestimate a production frontier with physical capital, humancapital, and labor as inputs. The article also analyzes whatdrives productive efficiency, using the institutional framework,macroeconomic stability, market quality, and urbanization aspossible explanatory factors. Urbanization turns out to be animportant determinant, with the rule of law, inflation rate,and market quality also affecting productive efficiency.     

Food Safety Issues,Trade and WTO Rules: A Developing Country Perspective

The SPS Agreement and the related WTO dispute settlement mechanism are an important first step in strengthening the global trade architecture, bringing in greater transparency and orderly conditions to world food trade. However, implementation of the new trade rules has turned out to be a more complex task than the traditional market access issues handled by the WTO. Several factors, including inadequate financial and technical resources, have constrained devel‐oping countries from becoming effective participants in the implementation process, and there is widespread suspicion that SPS regulations are being used as hidden protectionist devices by developed countries. However, despite all the problems, some developing countries have been quite successful in penetrating developed country food markets; they have done so by accepting the consumer preferences and standards in quality‐sensitive high‐income markets and implementing domestic supply‐side measures. While making full use of available international assistance initiatives, developing countries should view the task of complying with SPS standards not just as a barrier but also as an opportunity to upgrade quality standards and market sophistication in the food export sector.     

A bioeconomic model for determining the optimal response strategies for a new weed incursion

Invasions by non-indigenous plant species pose serious economic threats to Australian agricultural industries. When a new invader is identified a rapid response is critical, particularly if the invasive species has the ability to spread rapidly. An early decision is required whether to attempt to eradicate or contain the infestation, or do nothing and leave it to landholders to manage. These decisions should be based on economic considerations that account for long term benefits and costs. This paper describes a bioeconomic simulation framework with a mathematical model representing weed spread linked to a dynamic programming model to provide a means of determining the economically optimal weed management strategies over time, from the government’s perspective. The modelling framework is used to evaluate hypothetical case study invasive weed control scenarios in the Australian cropping systems. The benefit–cost ratios of invasion control are shown to be generally very high and clearly, there are significant benefits to be achieved by controlling highly invasive weeds when initial infestations are at a low level. Even if the invasion cannot be eradicated due to its high invasiveness or budget constraints, it still pays to maintain invasions at low levels.     

Stock market correlations between China and its emerging market neighbors

We examine interlinkages of stock return behavior for China and three emerging market neighbors from the Asia Pacific region from November 1993 to July 2008. Results are based on a VAR model. Impulse responses and vector decomposition of VAR are also utilized. Evidence suggests that the aggregate markets are mostly not interrelated. However, we observe relations between China and the other markets when foreign investor returns are specifically accounted for. In addition, a shock originating in China is significantly felt in the other equity markets. Stock market characteristics and macroeconomic conditions of these countries may help explain the observed relations.