Sheikh Selim
Cardiff Business School, Aberconway, Colum Drive, Cardiff University, CF10 3EU, United Kingdom
Stochastic frontier, Non-neutral frontier, Technical efficiency
Socio-economic and Policy
Labour wages
There are three popular rice hybrids in Bangladesh, Aus, Aman and Boro. Both Aman and Boro are cropped round the year, while Aus is cropped during March to September. During the mid-eighties, all three hybrids went through modernization with the introduction of high yield seeds, scientific methods of irrigation, fertilization and harvest. This resulted in an initial phase of growth in rice production, which eventually lasted for a brief period. Baffes and Gautam (1996) argue that the observed growth in aggregate rice production in Bangladesh until the early nineties was mainly because of the conversion of rice-growing areas from local to modern varieties. We present Baffes and Gautam (1996) estimates of growth rates of these hybrids. From the mid to late nineties, the aggregate rice production growth rate declined. According to BBS reports, the rice production growth target in the late nineties was 4.23% and the actual achieved was 0.95%. The projected growth rate of Aman production and Boro production in the late nineties were 3.03% and 6.07% and the actual achieved were 0.61% and 4.41%, respectively. The production growth of Aman actually dropped from its eighties’ average 1.64%, while that of Boro dropped from its eighties’ average 7.10%. For Aus the statistics are worse. The target growth rate in Aus in late nineties was 3.5% but its production declined by -3.22%, following a trend of declines of -3.43% and -2.89% in the eighties and early nineties. In figure 2 we present the trend in production of the three rice hybrids during 1980-2002, according to BBS reports. With the introduction of modern hybrids, more area under cultivation was allocated to Boro production. Boro’s cultivation is the least effort-intensive and its growth largely depends on timing of cultivation, land fertility and weather. Given a fixed supply of land, and since there is little choice for diverting Aman’s land to other crops because of high soil moisture and poor drainage, this had to be done at the expense of taking away land from Aus production. Some studies find a significant impact of this land reform in the drop in rice production growth rate in Bangladesh. Sharif and Dar (1996), for instance, find that there exists low technical efficiency in the production of modern variety of rice in Bangladesh, and one of the key factors affecting technical inefficiency in the production of particular hybrids is the land reform policy. Mahmud, Rahman and Zohir (1994) also argue along the same lines. None of these studies, however, examine explicitly if labour productivity had a significant impact on technical efficiency. It was recognized that in a state of overwhelming dependence on weather, when prices fluctuate with output, only price support policy to stimulate output is often ineffective. The concern of overwhelming dependence on land fertility propelled land reform policies. In addition, in order to improve the distributional channels, the government decided to move towards deregulation. The agricultural reforms in the nineties phase can be characterized as ones of regulatory reforms of input supply side towards deregulation and liberalization of input supply chains, crop diversification, and extended rice research and widening genetic base of rice. Since surplus labour earns zero marginal wage and thus adds little to the marginal product, without proper training and awareness, providing this labour force with new technology, hybrid seeds and new capital will, in general, depress agricultural productivity or efficiency in production. To see this more formally, consider a simple correspondence between technical efficiency and labour productivity. If all workers are paid their marginal product (and no worker is paid zero wage), they essentially induce more effort in order to increase their marginal product. Higher labour productivity reduces technical inefficiency since it adds value to the marginal productivity of other inputs. In the current context, it is interesting to examine the variation in this effect due to interactions of productivity with the inputs. If labour productivity is low, and if the labour market is predominantly informal, adding more fertilizer or seeds (or working days) to cultivation will depress the marginal effect of labour productivity on efficiency, since a predominantly informal labour force is less likely to exert more effort in order to use scientific inputs efficiently. We test this hypothesis in this paper. If our hypothesis is supported by data, it would imply that policy reforms in future should put emphasis on labour market reforms rather than flat subsidies.
Applied Economics, Taylor & Francis (Routledge), 2011, pp.1.
Journal