Investigation of economies of size in rice paddies of Guilan province

Document Type : Research Paper

Authors

1 previous masters student, Department of Agricultural Economic, faculty of Economic and Agricultural Develoment, University of Tehran. Tehran, Iran.

2 Assistant Professor of Department of Agricultural Economic, faculty of Economic and Agricultural Develoment, University of Tehran. . Tehran, Iran

3 professor of Department of Agricultural Economic, faculty of Economic and Agricultural Develoment, University of Tehran. . Tehran, Iran

Abstract

small lands are very common in rice farms, which, as economists believe, leads to the lack of optimal use of production resources and consequently increases production costs of rice and its price. Therefore, empirical investigation of economies of size in rice farms is very important for reducing production costs. To achieve purpose of the present study, data on rice production and its costs were collected from 180 farmers in four cities of Guilan province for the 2019-2020 crop year. Using Duality's theory, the cost function and demand functions estimated in three flexible functional forms namely Translog, Normalized Quadratic, and Generalized Leontief. Based on the estimated parameters of the best model, the elasticity of the size was estimated. As well, average cost function of rice production was estimated and based on it, the elasticity of the average cost with respect to the production was calculated.
The results show that Translog functional form is the most suitable form for the expression of rice production technology in Guilan province. Results show that structural parameter of “Return to Size” for paddy farms is equal to 1.33 in average and is greater than one for all the observations. As well, elasticity of average cost relative to production is negative for all the farmers. Therefore, estimated models prove the advantage of economies of size and negative slope of average cost function in all rice farms . So, there is no any farm with efficient size in the studied sample and it is possible to reduce the production costs and the cost price of rice by increasing the size of production for all the farms.
based on the findings of this research, land integration policies and increasing the size of rice paddies are suggested as an effective strategy to reduce production costs of rice production.

Keywords

References

Ansari, V. & Salami, H. (2008). "Economies of scale in Iran's shrimp farming industry". Journal of Agricultural Economics. Vol. 1, No. 3, pp 35-51.
Braeutigam R. & Daughety A. (1983) On the estimation of returns to scale
using variable cost functions. Economics Letters. No. 11, pp. 25-31.
Berndt, E. R. & Wood, D. O. (1975(. Technology, prices and derived demand for energy. The Review of Economics and Statistics. No. 52, pp 259-68.
Chembers, R. G. (1988). Applied production analysis: A dual approach, Cambridge.
Christensen L R. Green W H. (1976). Economic of scale in U.S electric Power generation. Ploitical Economic, 84.
Demetriou, D. (2013). The development of an integrated planning and decision support system (IPDSS) for land consolidation. Springer Science & Business Media.
Diewert, W. E. (1971). An application of the Shepard duality theorem: A general Leontief production function, Journal of Political Economics. Number 79, pp 481-507.
Diewert, W. E. & Wales A. J. (1987). Flexible functional Form and Global Curvature Conditions, Econometrica, No. 1, pp.43-68.
Erkkila, J. (1990). “Economic information about ironmaking.” J. of Applied Economic, 27.
Guttormsen, A. G. (2002). Input factor substitutability in Salmon aquaculture. Marin Resource Economics. No. 17, pp.91-102.
Garcia, R. & Randall, A. (1994). A cost function analysis to estimate effect of fertilizer policy on the supply of wheat and corn, Review of Agricultural Economies.Number 16, pp. 215-230.
Hosein Zad, J., Aref Eshgi, T. & Dashti, G. (1388). Determining the optimal size of rice fields in Guilan province. Journal of Economics and Agricultural Development. Vol. 23, No. 2, fall - winter 2009-10, pp. 117-127.
Horri, H., Sadeghi, Z. & Rezainejad, S. (2017) "Measuring economies of scale in Iran's electricity industry: the case of thermal power plants". Scientific Journal of Industrial Economics Research.  No. 6, pp. 7-18.
Mekhora, T. (1999). Econometric analysis on economies of scale: An application to rice and shrimp production in Thailand. Australian Agricultural and Resource Economics Society. (43th).
Mary, FM., Memon, R. & Lohano, H. (2007). Measuring returns to scale for onion tomato and chillies production in sindh province of Pakistan. International Jornal of Agriculture and biology. pp. 1053-1064.
Nagayets, O. (2005). Small farms: current status and key trends, information brief, prepared for the future of small farms. Research workshop wye collage, June.
Olinger, M. Mac Donald, J. And Madison, M. (2000). Structural change U.S. chicken and slaghter Economic Research service, U.S. Departeman of Agriculture Economic Report.
Ray, S.C. (1982). A translog cost function. Analysis of U.S. Agriculture.American. Journal of Agricultural Economics. No. 64, pp.  49-98.
Roller, L. H. (1990). proper quadratic cost functions with an application to the bell system. Review of economics and statistic. No. 72, pp.202-210.
Shahnushi, N. Alizadeh, P. Mohammadi, H. Saghian, S. Roya, A. (2018). "Investigating the cost structure and scale of cattle fattening farms in Mashhad". Journal of Science, Technology and Agriculture. No. 21, pp. 1753-1766.
Shahbazi, A. Jovan Bakht, A. (2018). "Investigation of the production structure of broiler chicken breeding units in Masjid Sulaiman city". Animal Science Research Journal. No. 2, pp. 15-29.
Saraee, Z. & Salami, H. (2013). "The potential of reducing the price of wheat and corn products using economies of scale". Iran's Agricultural Economics Journal. Number 1, pp. 77-94.
Stier J. C. (1985). Implication of factor substitution, Economies of Scale and Technological Change in The United States pulps and paper Industry. Forest science, Vol. 31, No. 4.
Selson, B. & J. Bullared. (1992). Input Substitution, economices Of Scale and Productivity Growth in the U.S Uohostered Furnitiure Industry. Applied Economics. No. 24, pp.1017-1024.
Sheng, Y., Zhao, SH., Noosal, K. & Zhang, D. (2015). Productivity and farm size in Australian agriculture: reinvestigating the returns to scale. Australian Journal of Agricultural and Resource Economics. 59.
Thompson, C. (1998). Choice of flexible functional form: review and appraisal, Western Journal of Agricultural Economics. No. 13, pp 169-183.
Agricultural Economics
Volume 16, Issue 4 - Serial Number 4
February 2023
Pages 115-146

Files

Share

How to cite

Statistics