13
Agricultural Administration 12 (1983) 141-153 Production Efficiency, Returns to Scale and Farm Size in Rice Production: Evidence from Sri Lanka H. M. G. Herath Department of Agricultural Economics, Faculty of Agriculture, University of Peradeniya, Sri Lanka (Received: 5 May, 1982) SUMMARY The incestigation of the effects of new technology embodied in the Green Retlolution on resource producticity provides concincing evidence that landproductiuity has increased. The returns to scale parameters indicate no increasing returns to scale either before or after the Green Recolution. In general, the use oftraditional ef$ciency criteria indicates inef$cient use of most resources. This study also shows that there are no economies of scale relative to farm size. The size productivity relationships in general show an inverse relationship between labour use andfarm size anda direct relationship between projit and farm size. INTRODUCTION The Green Revolution package provided farmers in most rice growing countries with a basis for speeding up development. The post-Green Revolution evidence indicates that the diffusion and adoption of the new technology are highly uneven both amongst and within countries.’ The adoption of new technology requires a concomitant change in their cultivation techniques; in particular, high dosages of fertiliser and more labour are required. Because of this dynamic nature of technical change, allocative efficiencies may be different in regions using new and tradi- tional technologies.2 The uneven adoption of new technology can also exacerbate existing income differentials. This would be further aggravated if new technology shows increasing returns to scale. Many previous studies have assumed 141 Agricultural Administration 0309-586xj83/0012-0141/$03+)0 0 Applied Science Publishers Ltd, England, 1983. Printed in Great Britain

Production efficiency, returns to scale and farm size in rice production: Evidence from Sri Lanka

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Agricultural Administration 12 (1983) 141-153

Production Efficiency, Returns to Scale and Farm Size in Rice Production: Evidence from Sri Lanka

H. M. G. Herath

Department of Agricultural Economics, Faculty of Agriculture, University of Peradeniya, Sri Lanka

(Received: 5 May, 1982)

SUMMARY

The incestigation of the effects of new technology embodied in the Green Retlolution on resource producticity provides concincing evidence that landproductiuity has increased. The returns to scale parameters indicate no increasing returns to scale either before or after the Green Recolution. In general, the use oftraditional ef$ciency criteria indicates inef$cient use of most resources. This study also shows that there are no economies of scale relative to farm size. The size productivity relationships in general show an inverse relationship between labour use andfarm size anda direct relationship between projit and farm size.

INTRODUCTION

The Green Revolution package provided farmers in most rice growing countries with a basis for speeding up development. The post-Green Revolution evidence indicates that the diffusion and adoption of the new technology are highly uneven both amongst and within countries.’ The adoption of new technology requires a concomitant change in their cultivation techniques; in particular, high dosages of fertiliser and more labour are required. Because of this dynamic nature of technical change, allocative efficiencies may be different in regions using new and tradi- tional technologies.2

The uneven adoption of new technology can also exacerbate existing income differentials. This would be further aggravated if new technology shows increasing returns to scale. Many previous studies have assumed

141 Agricultural Administration 0309-586xj83/0012-0141/$03+)0 0 Applied Science Publishers Ltd, England, 1983. Printed in Great Britain

142 H. M. G. Herath

constant returns to scale.3 Some studies also suggest that smallholder agriculture is characterised by an inverse relationship between output and farm size.4-6 They contend, however, that net profit per acre is positively related to farm size. It is therefore useful to study how new technology has affected the above relationships.

The specific objectives of this study are:

(1) To determine the productivity of resources under modern and traditional technologies.

(2) To test the hypothesis of constant returns to scale with data for the post-Green Revolution period.

(3) To study the types of allocative inefficiencies present under modern and traditional technologies.

(4) To test the hypothesis that farm size is both inversely related to output per acre and positively related to net profits per acre.

METHOD OF ANALYSIS

Data

The data for this study were collected from two rice growing areas in Sri Lanka-the Kandy district and the Anuradhapura district. The village selected from the Kandy district is called Galaha (hereafter referred to as the Galaha sample) and the sample from the Anuradhapura district was selected from an area close to the city (hereafter referred to as the Anuradhapura sample). The data pertain to the two seasons, Yala, 1980 (dry season), and Maha, 1980/81 (wet season). The two areas have contrasting economic and agricultural features. The most important observation in the two areas is that the rice farmers in the Anuradhapura sample use improved varieties of rice and the farmers in the Galaha sample use traditional varieties. The two areas would therefore reflect the differential impact of technical change in rice production. The sample selection was based on a stratified random sampling procedure. Stratification was done according to farm size. From each stratum a random sample was selected. The farms in the Galaha sample are small relative to those of Anuradhapura. Three size groups were distinguished in each area (see Tables 1 and 2). The nature of the returns to scale and efficiency of resource use were tested for each size class separately. The size-productivity relationships were examined for the total sample.

TABL

E I

Prod

uctio

n Fu

nctio

ns

and

Retu

rns

to S

cale

in R

ice

Prod

uctio

n in

Sri

Lank

a:

Gal

aha

Sam

ple

Seas

on

Farm

siz

e (a

cres

) Sa

mpl

e Pa

ram

eter

s si

ze

Cons

tant

La

bour

us

e O

pera

ting

Farm

siz

e co

st

Yala

, 19

80

<0.5

22

7,

099

- 0,

223

26

0.14

2 86

(0

.320

99)

(0

.116

14)

M

aha,

19

80/8

1 <0

.5

33

5.84

2 02

-0

.158

29

0.40

9 73

**

(0.2

13 7

1)

(0.1

3438

) Ya

la,

1980

0.

5-l

.o

42

4.49

3 28

0.

1189

2 0,

374

33*

(0.1

6495

) (0

.140

66)

Mah

a,

1980

/8 I

0.55

1 .o

47

5.32

448

0.14

453

0.25

9 05

**

(0.1

46 5

1)

(0.0

89 4

6)

Mah

a,

1980

/81

> 1.

0 34

4.

739

18

0.02

8 54

0,

299

32*

(0.2

1622

) (0

.153

23)

Note

s:

Figu

res

with

in

pare

nthe

ses

indi

cate

th

e st

anda

rd

erro

rs.

* Si

gnifi

cant

ly

diffe

rent

fro

m

zero

at

the

1 y0

leve

l. **

Sig

nific

antly

di

ffere

nt

from

ze

ro a

t th

e 5

“A le

vel.

***

Sign

ifica

ntly

di

ffere

nt

from

un

ity

at t

he 5

“/, l

evel

.

Buffa

lo

cost

R2

Re

turn

s to

sca

le

1.00

846*

* (0

.232

42)

0.

666

39**

(0

.192

71)

0.

148

35

(0.2

09 5

5)

0.37

2 78

**

(0.1

6668

) 0.

501

73*

(0.2

57 9

6)

0.09

3 54

(0

,082

56)

0,

013

48

(0.0

53 5

6)

- 0.

009

21

(0,0

61 9

3)

-0.0

25

44

(0.0

59 4

5)

0.15

3 83

* (0

,078

92)

-

0.79

7 1.

0216

0.78

9 0.

931

3

0.32

2 0.

632*

**

0.50

5 0.

751*

**

0.66

0.

983

TABL

E 2

Prod

uctio

n Fu

nctio

ns

and

Retu

rns

to S

cale

in R

ice

Prod

uctio

n in

Sri

Lank

a:

Anur

adha

pura

Sa

mpl

e

Seas

on

Farm

siz

e Sa

mpl

e (a

cres

) si

ze

Cons

tant

La

bour

us

e Bu

ffdo

cost

Yala

, 19

80

< 1.

0 27

5.

000

19

0.26

7 24

* -0

.014

33

(0,1

44 7

8)

(0.0

09 4

6)

Mah

a,

1980

/81

<I.0

31

8.

404

31

-0.1

1674

-0

.014

14

* (0

.143

17)

(0

,007

49)

Ya

la,

1980

1.

0-3.

0 28

8,

494

87

0.02

35 2

4*

0.02

5 75

(0

.128

42)

(0

.019

93)

Mah

a,

1980

/81

1 ,o-

3.0

41

8.58

2 83

-0

,005

23

0,

003

25

(0.1

46 3

6)

(0.0

06 3

9)

Mah

a, 1

980/

8 1

> 3.

0 38

7.

253

12

0.06

3 34

-

0.00

9 99

(0

.130

55)

(0

.007

64)

Ya

la,

1980

>

3.0

11

7.84

2 18

-

0.02

7 79

-0

.010

26

(0.3

05 4

7)

(0.0

1687

)

Note

s: F

igur

es w

ithin

pa

rent

hese

s in

dica

te

the

stan

dard

er

rors

. *

Sign

ifica

ntly

di

ffere

nt

from

ze

ro a

t th

e 1 7

” le

vel.

** S

igni

fican

tly

diffe

rent

fro

m

zero

at

the

5 y0

leve

l. *?

;* Si

gnifi

cant

ly

diffe

rent

fro

m

unity

at

the

5 “A

leve

l.

Para

met

ers

Mac

hine

ry

Farm

siz

e O

pera

ting

cost

-0.0

1041

0,

534

78*

(0,0

09 6

5)

(0.2

64 2

6)

-0.0

07

06

1.19

8 32

**

(0.0

07 6

3)

(0.2

2192

) -0

.041

35

0.34

243

(0.0

3497

) (0

,583

38)

0,

0178

0*

1,00

48**

(0

.009

00)

(0

.209

02)

-0

.003

42

1.04

450*

* (0

.008

20)

(0

,293

07)

-0

,020

10

1,

264

15**

(0

.172

40)

(0.5

59 9

0)

0,26

5 17

(0

.176

20)

0,07

5 57

(0

.122

31)

- 0.

057

78

(0.3

02 2

0)

-0.0

5666

(0

.103

22)

0.

088

29

(0.1

3790

) 0.

055

02

(0,2

41 1

5)

R2

Retu

rns

to s

cale

0,67

5 60

0.

777

28**

*

0.74

1 18

3 I.1

3595

0.39

2 71

0.

5042

9***

0.57

2 64

0 2

0.96

3 96

0.36

1 71

8 1.

1827

2

0,70

5 39

84

1.26

102*

**

Production efJiciency and farm size in rice production 145

Technological change and resource productivity

In order to proceed on the main objectives the simple production function model of the CobbDouglas type given below was fitted:

Y=AX;‘X,b’,...,X> (1)

where Y is the dependent variable, the X,s represent the different indepen- dent variables and the bp are the partial elasticities of the different variables. In this study the dependent variable is gross farm income and the independent variables are farm size, human labour, bullock power, machinery use and operating cost.

The output was measured in terms of the value of output per farm. In cases where domestic consumption, as well as payments in kind, is reported, the valuation of such items was based on the existing market prices. Land input was measured as a stock variable by the physical amount of land measured in acres. The human labour variable combines family labour, hired labour and also, in some cases, exchange labour. The labour variable was incorporated in terms of man-day equivalents by taking 8 hours of work as a day. In computing equivalent man-days of work per farm, a woman-day and a child-day were considered to be 0.75 and 0.5 of a man-day, respectively. The operating cost variable included inputs such as fertiliser, herbicides, pesticides and all other incidental expenses measured in rupees. The bullock labour variable was measured in terms of the number of pairdays. The variable representing mechanical services is an important variable in the context of technical change. This was measured in terms of the cash expenditure on mechanical services. The above functions, fitted to the three different sizes in each area for the two seasons, are presented in Tables 1 and 2.

Results

The results in Tables 1 and 2 indicate that one of the most important variables in both areas and for all sizes-is farm size. It was found to be significant in four of five cases examined in the Galaha sample and in five of six for the Anuradhapura sample. A striking point is the larger partial elasticity coefficient for land in the Anuradhapura sample where high yielding varieties are widely used. Similar findings have been reported by others. The elasticities were above 1 in most cases in the Anuradhapura sample atid were lower than 1 in the Galaha sample. With regard to

146 H. M. G. Herath

labour, it was noted that in the Galaha sample where farm sizes were generally very small and no technical change was observed, the elasticity coefficients were not statistically significant at traditional levels. Also, in some cases, the elasticity was found to be negative. In contrast to the Galaha sample, however, the labour variable was found to be significant in two of six cases in the Anuradhapura sample. In three cases it was found to be negative but not significant. Another important feature of the results relates to the operating cost variable in the Galaha sample. The operating cost variable comprises mainly fertiliser use, herbicides and pesticides use, etc. The coefficient was found to be significant in four out of the five cases in the Galaha sample. The operating cost variable was not found to be significant at any level in the Anuradhapura sample. The other inputs common for both samples is the buffalo use variable which was found to be negative in four cases in the Anuradhapura sample. In the Galaha sample also this variable was found to be negative in two cases although the coefficients were found to be insignificant. The mechanical services variable, which was reported only for the Anuradhapura sample, was found to be negative in five of the six cases.

Returns to scale iu paddy production

The returns to scale parameter is determined by the summation of the partial elasticities of the CobbDouglas production function. This is then statistically tested for deviation from unity, and if it is not significantly different from unity, then constant returns to scale are said to prevail. The returns to scale parameters of the function discussed above are also given in Tables 1 and 2. It is noted that the scale parameters are not statistically different from unity in three cases in the Galaha sample. In two cases they are statistically different from unity and lower than 1. In the Anuradhapura sample the scale parameters are not significantly different from unity in three cases. In two cases the parameter is significantly different from unity and lower than 1. In the other case it is significantly different from one and greater than 1.

Allocative efficiency

The ratio between marginal value productivities obtained from the production functions to opportunity cost (market prices) for the inputs gives an indication of allocative efficiency. If the ratio is greater (less) than

Production efjciency and farm size in rice production 147

unity, more (less) of that input should be used. The marginal value products are determined using the elasticities and the geometric means of the inputs and output. The market price of renting an acre of land was taken as the average value of land per acre. The average value of the landlord’s crop share was assumed to reflect the value of land. This was computed to be Rs.800.00 and Rs.1600.00 per acre for the Galaha and Anuradhapura samples, respectively. The average wage rate for a man- day of labour was Rs.1500 and Rs.2500 in the Galaha and Anuradhapura samples, respectively. This was taken to reflect the opportunity cost of labour. The opportunity cost of a rupee spent on production was treated as 1.2, taking an average interest rate of 20 % for short-term loans. The marginal value products and the ratios of the marginal value products to the factor costs are presented in Tables 3 and 4 for the two samples.

It is seen that most of the ratios are different from 1 and hence most variables are not used efficiently. Land appears to be under-utilised in the ~0.5 acre group in the Galaha sample whereas, in the other two size groups, it appears to be more intensively used. Under-utilisation of land appears to be even more prevalent in the Anuradhapura sample except for the l-3 acre group in the Yala season. An over-utilisation of labour is evident in both samples for all size groups and also for both seasons. This may seem difficult to reconcile at first in the Anuradhapura sample where

TABLE 3 Marginal Value Products and the Ratios of Marginal Value Products to Factor Cost:

Galaha Sample

Yala, 1980 < 0.5 AC. 0.5-1.0 AC.

Maha, 1980/81 <O.SAc. 0.fl.O AC. >l.OAc.

Marginal Value Products (Rs.) Land (Acres) 1260.65 Labour (Man-days) 1.95 Buffalo Use (Rs.) 0.83 Operating Cost (Rs.) 1.26

175.34 1005.74 555.11 642.97 1.50 1.60 2.23 0.58 0.05 0.12 0.19 1.03 2.78 3.68 2.33 2.60

Ratios of Marginal Value Products to Factor Costs Land (Acres) 1.58 0.22 1.26 0.69 0.80 Labour (Man-days) 0.13 0.10 0.12 0.13 0.04 Buffalo (Rs.) 0.69 0.13 0.10 0.16 0.86 Operating Cost (Rs.) 1.05 2.32 3.07 1.94 1.33

148 H. M. G. Herath

TABLE 4 Marginal Value Products and the Ratios of Marginal Value Products to Factor Costs:

Anuradhapura Sample

Yala, 1980 Maha, 1980181 <I.OAc. 1-3 AC. >3Ac. <I.OAc. 1-3 AC. >3Ac.

Marginal Value Products (Rs.) Land (Acres) 2 280.44 1440.65 5 280.32 4979.75 4 169.99 4 166.37 Labour (Man-days) 21.19 13.80 2.66 8.75 0.47 6.36 Buffaloes (Rs.) 0.22 0.55 0.23 0.19 0.06 0.13 Machinery (Rs.) 0.10 0.41 0.18 0.08 0.20 0.03 Operating cost (Rs.) 3.75 0.87 69.22 0.91 0.87 1.07

Ratio of Marginal Value Products to Factor Cost Land (Acres) 1.43 0.90 3.30 3.11 2.60 2.60 Labour (Man-days) 0.84 0.55 0.11 0.35 0.02 0.25 Buffaloes (Rs.) 0.18 0.46 0.19 0.16 0.04 0.11 Machinery (Rs.) 0.08 0.34 0.15 0.07 0.16 0.02 Operating cost (Rs.) 3.12 0.72 57.68 0.76 0.72 0.89

labour bottlenecks are generally experienced. However, the adoption of mechanisation may have broken the labour bottleneck and may have made some labour redundant. It is necessary to caution, however, that the use of the daily wage rate for both hired and family labour may perhaps overstate the opportunity cost of family labour and the indicated inefficiencies may be illusory.

An over-utilisation of buffaloes in both samples and of machinery in the Anuradhapura sample is evident in all three size groups. The indivisibility of some of these inputs such as tractors may account for the over-utilisation of such inputs.

The operating cost variable which embodies expenditure on cash inputs such as fertiliser and herbicides did indicate some interesting features. In the Anuradhapura sample these inputs appear to be used efficiently in the Maha season. An under-application of these inputs is evident in the Yala season. The under-utilisation of this variable in Yala could be due to shortages of water. This may also have been influenced by other factors, such as credit, but appears to be more related to the risk of applying fertiliser and other inputs in the face of uncertainty about water availability.‘j The operating cost variable is also less optimal in the Galaha sample. This may be caused more by capital bottlenecks since, in this area, institutional sources of borrowing are less well organised.

Production efjciency and farm size in rice production 149

RETURNS TO SCALE RELATIVE TO FARM SIZE

The finding that physical returns to scale are constant both prior to and after the Green Revolution does not imply that constant returns to scale will hold relative to any one factor, e.g. land, labour or capital. By and large, technological change in Sri Lanka has been oriented towards modern inputs raising productivity per acre. Since there is evidence of differential adoption and level of application of new technology among different farm size groups, it can be postulated that the size-productivity relationship may have changed to a positive one in recent years.

In this study the size-productivity relationship was investigated by fitting the function Y = aXb where Y is output per farm and Xis farm size. The statistical results of this estimation are given in Table 5. In all cases examined the coefficient for land was not significantly different from unity. Thus, both for the Green Revolution and the pre-Green Revolution period the scale parameter for land did not change. Thus it is concluded that in general there are no decreasing or increasing economies of scale relative to farm size.

TABLE 5 The Relationship Between Output Per Farm and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Anuradhapura 1980/81 Maha 118 4.2102 0.966 5 0.885 8956 (0.021 1)

Anuradhapura 1980 Yala 61 4.2418 0.979 4 0.855 383.52 (0.029 4)

Galaha 1980/81 Maha 113 3.421 3 0.9130 0.875 783.82 (0.022 5)

Galaha 1980 Yala 101 3.260 8 0.905 3 0.818 447.75 (0.028)

Notes: Figures within parentheses indicate standard error.

FARM SIZE AND PRODUCTIVITY RELATIONSHIPS

The studies in the pre-Green Revolution period indicated that higher output per unit of land on small farms was a function of higher application of inputs of labour and non-labour per unit of land.7 The

150 H. M. G. Herath

TABLE 6 Relationship Between Labour Cost and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Anuradhapura 1980 Yala 66 5402 0.154 2 0.06 442 (0.235 7)

Anuradhapura 1980/81 Maha 118 6.946 2 (0.777 6* 0.69 258.38 (0.032)

Galaha 1980 Yala 101 6.941 0.432 8* 0.57 135.84 (0.025 3)

Galaha 1980/81 Maha 113 7.076 0.5819* 0.49 107.33 (0.038)

* Significantly different from unity at 5 y0 level.

relationship between input use, size and productivity in rice production in Sri Lanka was tested by fitting three equations where farm size is the independent variable in all three models. In model 1, labour cost (family, hired and exchange) was used as a dependent variable. In model 2, all non-labour input cost was used as a dependent variable. In model 3, total cost (labour and non-labour imputed and actually incurred) was used as a dependent variable.

The results of this analysis are presented in Tables 6,7 and 8. The data in Table 6 indicate that all coefficients are significantly different and lower than unity except for the Yala, 1980 for the Anuradhapura sample. All in

TABLE 7 Relationship Between Non-labour Cost and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Anuradhapura 1980 Yala 66 4.944 7 0.999 9 0.098 I 7.1247 (0.246)

Anuradhapura 1980/81 Maha 118 6.676 1 1.044 7* 0.9014 1060.94 (0.02 1 2)

Galaha 1980 Yala 101 5.6819 0.590 8* 0.398 6 65.62 (0.062 4)

Galaha 1980/81 Maha 113 5.838 5 0.925 6* 0.676 7 232.42 (0.041)

* Significantly different from unity at the 5 y0 level.

Production efjciency andfarm size in rice production 151

TABLE 8 Relationship Between Total Cost and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Anuradhapura 1980 Yala 66 5.646 7 1.064 6 0.094 2 6.662 (0.251)

Anuradhapura 1980/8 1 Maha 118 7.467 6 0.893 7* 0.475 I 105.252 (0.058)

Galaha 1980 Yala 101 1,216 6 0.560 9* 0.7515 299.453 (0.021 5)

Galaha 1980/8 1 Maha 113 7.3174 0.610 I* 0.766 7 364.849

* Significantly different from unity at the 5 y0 level.

all, this therefore indicates that there is an inverse relationship between labour inputs and farm size. The total labour inputs per acre decline as the farm size increases. Table 7 presents the results for the relationships between non-labour inputs and farm size. The results indicate that the coefficients are significantly different from unity in three cases. In two of these cases, the coefficients are less than unity and in one case it is greater than unity. The results in general support the inverse relationship between non-labour inputs and farm size. Table 8 presents the data with respect to total costs and farm size and here, again, an inverse relationship is observed.

PROFIT PER ACRE AND FARM SIZE

It is contended that there is a direct relationship between profit per acre and farm size. This was tested with the data in the present study by fitting a function of the form Y = aXb where Y is profit and Xis the farm size. In the Galaha sample it was noted that most farmers obtained negative profits. Thus, in fitting the function, the sample was divided into those who sustained losses and those who obtained profits and separate functions were fitted for the two groups. The negative profits were treated as losses (which are positive to avoid logs of negative numbers) and regressed against farm size. The results are presented in Tables 9 and 10. The results in Table 9 indicate that, as far as profits are concerned, in the Galaha sample in two cases it was significantly different from unity and

152 H. M. G. Herath

TABLE 9 Relationship Between Profit and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Anuradhapura 1980 Yala 65 1.1512 0.7284* 0.47 56.512 (0.063)

Anuradhapura 1980/81 Maha 118 8.3449 -0.0003 0.000 1 0.149 (0.142)

Galaha 1980 Yala 9 3.6682 3.5265* 0.422 5.115 (0.368)

Galaha 1980/81 Maha 19 5.0303 1.645 3* 0.271 6.35 (0.294)

* Significantly different from unity at the 5 o/0 level.

TABLE 10 Relationship Between Loss and Farm Size

Sample Year and Sample Parameters season size a b R2 F ratio

Galaha 1980/81 Maha 92 5.585 08 -0.104 324* OX)04 2 0.386 5 (0.110 1)

Galaha 1980 Yala 94 5.236 72 - 0.059 08* 0.0015 0.138997 (0.107 11)

* Significantly different from unity at the 5 y0 level.

greater than 1 and in the Anuradhapura sample it is significantly different from unity and lower than 1. Table 10 indicates that in the case of losses the coefficient is significantly different from unity and less than 1. Although these results are mixed, there is strong evidence about a positive relationship between profit and farm size both prior to and after the Green Revolution.

SUMMARY AND CONCLUSIONS

The analysis conducted herein using the Cobb-Douglas framework provided evidence that the productivity of the land resource has increased after the Green Revolution, confirming that the new rice varieties belong

Production efficiency and farm size in rice production 153

to a land-saving type of technology. There is also evidence that the returns to scale characteristics have not significantly altered after the Green Revolution and in general constant returns to scale prevail. The exploration made on allocative efficiency indicates an under-utilisation of land in both samples. This has been even more crucial after the Green Revolution. In respect to operating cost, under-utilisation was observed in the Galaha sample. The study of size-productivity relationships indicated that there are no economies of scale. It was noted that there was an inverse relationship between farm size, labour use, non-labour inputs and total costs. A direct relationship between profitability and farm size was observed. One could surmise that the institutional factors, such as lack of capital, or irrigation facilities, prevent farmers benefitting from new technology. In general the study indicates that institutions are biased against small farmers. Undesirable impacts, such as exacerbation of income differentials, could be obviated by creating a more propitious institutional set up. Within the limits of this study technology by itself cannot be considered to have contributed significantly to disparities in incomes in rural communities.

REFERENCES

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