An analysis of tenancy for paddy farmers in West Java, Indonesia

Abstract

The study of the role of tenancy in paddy production is very important since tenancy may have affected the performance of rice intensification programs through which the government intends to increase production. The Department of Agriculture has assumed that a tenant may have less incentive than an owner-operator to increase production and to participate in the intensification programs. If this is so, then production may be increased by changing the institutional setting through tenancy reform. This study attempts to test the effect of tenure status and farm size on the allocation of resources used in paddy production. The profit function approach is used to test for allocative efficiency differences between farms of different tenure status and cultivated area. This was done by measuring relative economic efficiency, relative price efficiency, relative technical efficiency and absolute price efficiency. In order to know the effectiveness of price policy, the output supply response and labour demand functions are derived from the profit function. The results show that tenure status is not a constraint on increased paddy production. However rearranging the institutional setting through tenancy reform might reduce oligopsonistic power in the land market, which is currently restricting the transfer of operating control over agricultural land from the poor to the rich. Paddy price policies still have some positive effect in increasing paddy supply. If the government redistributed the rice field land up to the minimum of losses and 0.5 hectare, then there would not be there would probably be improvements substantial efficiency in income equality. Show more