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.
PhilippinesThe supply response and input demand by farmers using modern rice technology in Laguna, Philippines were estimated using profit function analysis. The results indicate that farmers do maximise short-term profits and respond to price changes efficiently. The supply elasticity of rice with respect to its own price was approximately unity. Changes in real wages were estimated to have a greater impact on rice profit and supplies than changes in the real prices of mechanised land preparation, fertiliser or pesticides. Production elasticities derived from the profit function were consistent with those estimated directly from the underlying production function.
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