Coconut production in Southern Tagalog, Philippines : a case study approach of measures of relative economic efficiency

Abstract

The relevance of the Philippine coconut industry is highlighted by the shifting emphasis on the pattern of farm production, introducing innovative cultivation techniques of intercropping among subsistence farms coupled with the growing belief that small farms are relatively more economic-efficient than large farms. While the industry has remained as a major dollar earner and has significant importance in the agricultural landscape, it is basically characterized by relatively low levels of production. This study, therefore, investigates the relative economic efficiency of coconut farms in the Philippines particularly the Southern Tagalog region. It uses cross-sectional data of 308 sample farms with the reference period of one year, 1973-1974. These data have been provided by the Bureau of Agricultural Economics (Philippines). The relative economic efficiency of the coconut farms is determined by the Lau-Yotopoulos profit function with implicit Cobb-Douglas production function. Within the limits of available data, measurement of the farms' relative economic efficiency concentrates on only two categories namely, farm type and farm size. Following the chosen functional model and the categories mentioned, the relative economic efficiency of the farms are mathematically measured and analyzed through a regression model which includes five (5) variables, the coefficients of which are estimated by the least squares profit function in logarithmic form. The results, though tentative, are generally consistent and statistically reliable. As expected, the empirical evidence favours the small farms as relatively more economic-efficient than large farms, In particular, small mixed coconut farms in Laguna-Batangas provinces are observed to be more economic-efficient compared to others. The achieved results, however, do not suffice to draw conclusions as to where the superior economic efficiency of small farms rests. Hence, the study merits further studies attendant to this query.