The allocation of resources in Philippine corn farming
Date
1975
Authors
Hiwatig, Mario H
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Publisher
Canberra, ACT : The Australian National University
Abstract
This study attempts to describe and analyse input-output
relationships on Philippine corn farms by fitting the Cobb-Douglas
production function to survey data of 1,427 farm enterprises
onumeratod from nine nolocted corn-growing regions for crop year
1972-73.
The functional form of t}ie economic model is specified as: that
the gross output of a corn enterprise (measured in cavan or sack of
57 kilograms) is a function of land area (measured in hectare), manlabour
(measured in man-days), capital services (measured in pesos),
amount of fertilizer applied (measured in kilograms), and quantity of
seeds used (measured in cavan). The model is modified to include the
effects of farm location (province), cropping season, and time of
planting. The latter group of variables are represented by dummies
in the estimation.
The coefficients representing such factors like location,
cropping season and time of planting are reflective of the relative
productivity of provinces (seasons, time) within a region (all
seasons, all times of planting). On the basis of their corresponding
coefficients, a number of provinces appeared inherently more
suitable to the production of the crop. The contribution of cropping
seasons and planting time to the variability of farm output is
found to be important for some corn-growing areas.
The average production functions estimated for each region are
used as bases for calculating the marginal physical products (MPPs)
and marginal returns to factors of production. The results of the
calculation shows that a widespread misallocation of inputs existed
among smallholder corn farms. The marginal returns to land are
found substantially higher than their corresponding land rent per
hectare. Rather than argue that land is under-utilised, it is felt
more strongly that the current land rent does not reflect the true market value of land. The labour input, on the other hand, appears to
have been over-utilised in eight out of nine regions. The overutilisation
of this resource is indicated by the negative net MVPs obtained
while assuming that the prevailing wage rates for each region represent
the competitive price of this factor. Thus, it is asserted that
labour surplus exists and that this input is redundantly used in
corn production. To attain the optimum use of labour, the indicated
readjustment of resources tends to reduce this input sizably from the
current level.
Capital services are, probably, under-utilised as reflected in
the magnitude of the positive net MVPs estimated for this input. In
some regions, however, the production elasticity for capital is found
to be negative. This is felt to be due to measurement errors as certain
forms of capital assets may have been enumerated in some farms although
such items are not actually used.
Fertilizer is severely under-utilised in most regions although it
is more extensively applied in the Mindanao areas. To optimise the
use of fertilizer and thus maximise the returns to this input, it is
suggested that much higher levels than the current rate would be
required.
The rate of seeding appears to have been under-estimated by corn
farmers. The sizable magnitude of the net MVPs estimated for the
seed input indicates that seed is under-utilised.
Constant returns to scale are indicated for Central Visayas,
Eastern Visayas, Northern Mindanao, and Southern Mindanao regions.
Decreasing returns to scale quite strongly describe corn production
in Cagayan Valley, Bicol, Western Visayas, and VIestern Mindanao. It is only in Northeastern Mindanao where increasing returns to
scale is indicated.
An investigation of the economic efficiency of two major
compositions of man-labour inputs is pursued in the Visayas and
Mindanao regions. The results show that while family labour is an important factor in corn production, it is excessively utilised. The
contribution of hired labour to the variability in corn output is highly
significant but this type of labour is not used efficiently as well.
There is a bias felt to have been introduced by the errors of
measurement of the labour input in this study so that the estimation
of marginal productivity and/or marginal returns of this particular
input may not be a true reflection of its efficiency. Furthermore,
this study would hesitate to prescribe policies on the basis of what
has been so far shown by these results without first pursuing further
investigations of more localised corn-producing areas or provinces.
It is felt that because of the apparently significant differences of
marginal productivities arising from significant locational and/or
seasonal variations, it is only appropriate that policies must come down
to the-provincial level rather than on a regional basis.
Further analyses of fertilizer usage in the Mindanao regions
reveal that where this input is applied, the yield or production
per hectare is found to be substantially greater than where it is not
used. Then, on the basis of the average production function derived
for each group of farmers (i.e. fertilizer-users' group and non-users'
group) the technical efficiencies of farmers are evaluated.
Such analyses of technical efficiency based on the average
production function can be adopted to separate the relatively
efficient producers from the relatively inefficient farmers. Extension
programs may yet prove more effective utilising the techniques of
efficient corn farmers thus identified.
For future surveys, this study recommends a somewhat more
detailed collection of data, the proper stratification of farming
areas (in terms of physical and seasonal factors) and collection of
farm specific price information both for factors of production and output. Furthermore, a time series type of data gathering is
suggested to allow for variations due to unpredictable factors that
may affect the industry during any particular year if further analyses
of this type are to be attempted with the intention of arriving at
policy conclusions.
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