Factors Affecting the Economic and Social Well
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Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1971 Factors affecting the economic and social well- being of agriculturalists in less-developed countries and agriculture's contribution to general economic expansion Roger Wayne Hexem Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Agricultural and Resource Economics Commons, and the Agricultural Economics Commons Recommended Citation Hexem, Roger Wayne, "Factors affecting the economic and social well-being of agriculturalists in less-developed countries and agriculture's contribution to general economic expansion" (1971). Retrospective Theses and Dissertations. 4404. https://lib.dr.iastate.edu/rtd/4404 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. 71-21,950 HEXEM, Roger Wayne, 1935- FACTORS AFFECTING THE ECONOMIC AND SOCIAL WELL-BEING OF AGRICULTURALISTS IN LESS- DEVELOPED COUNTRIES AND AGRICULTURE'S CONTRIBUTION TO GENERAL ECONOMIC EXPANSION (VOLUMES 1 AND 2). Iowa State University, Ph.D., 1971 Economics, agricultural University Microfilms, A XEROX Company, Ann Arbor, Michigan @ Copyright by Roger Wayne Hexem 1971 THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED Factors affecting the economic and social well-being of agri culturalists in less-developed countries and agriculture's contribution to general economic expansion by Roger Wayne Hexem Volune 1 of 2 A Dissertation Submitted to the Graduate Faculty in Partial Fulfillment of The Requirements for the Degree of DOCTOR OF PHILOSOPHY Major Subject: Agricultural Economics Approved: Signature was redacted for privacy. In Charge of Major Work Signature was redacted for privacy. Signature was redacted for privacy. of Gradu. Iowa State University Of Science and Technology Ames, Iowa 1971 . il TABLE OF CONTENTS Page CHAPTER I. INTRODUCTION 1 Objective, Methods of Procedure, and Organization of the Study 14 Literature Cited 18 CHAPTER II. BASIC ECONOMIC CONCEPTS AND ADAPTATIONS TO LESS- DEVELOPED AREAS 20 Production Function 21 Marginal Conditions for Economic Efficiency 23 Least-cost combinations of resources 24 Optimal output configurations 24 Tenurial arrangements and the marginal conditions 31 Demand for Inputs of Production 34 Single input, static demand 35 Two-factor static demand 36 Supply of Inputs of Production 41 Agricultural labor 42 Agricultural credit 46 Land 48 Product Supply 49 Investment Decisions 52 Uncertainty 55 Price uncertainty 56 Technical and technological uncertainty 56 Institutional uncertainty 57 Lii Page Circular Nature of Economic Activities 59 Tentative Conclusion 63 Literature Cited 65 CHAPTER III. LAND TENURE SYSTEMS AND FIRM SIZE 66 Tenure Systems--A Theoretical Examination 72 Owner-operator producers 72 Landlord-tenant arrangement 74 Landless laborers 84 Firm Size and Tenure 86 Latin America 92 Fragmentation of holdings 107 Tenancy systems 108 Africa 113 As ia 124 Fragmentation of holdings 131 Tenancy conditions 138 Potential for Increasing Land Under Cultivation 142 Literature Cited 160 CHAPTER IV. PRODUCTION TECHNIQUE 163 Technological Change Versus Change in Production Technique 165 Embodied and disembodied technological change 167 Effect on input demand 169 Factors Affecting Change in Production Technique and Rate of Adoption of New Technology 173 iv Page Awareness 173 Adaptability and adoptability 175 Producers' objectives 178 Optimal Production Technique 180 Two input, one output, static case 182 Two input, two output, static case 185 Two input, two output, dynamic case 192 Two input, two output, static macro-economic case 194 Two input, two output, dynamic macro-economic case 197 Choice Indicators and Imputation of Product to Production Inputs 201 Literature Cited 207 CHAPTER V. RURAL CREDIT INSTITUTIONS 208 Demand for Credit 211 Sources of Credit 229 Lenders' objectives 234 Terms of credit 235 Competition among lenders 249 Regulation of lending practices 251 Credit availability relative to needs 256 Summary 25 9 Literature Cited 262 V Page CHAPTER VI. MARKET SYSTEMS AS A COMPONENT OF SOCIAL OVERHEAD CAPITAL FACILITIES 264 Role of Marketing Mechanism 268 Market-exchange system 271 Expenditures on consumer goods affecting quantities marketed 275 Merchant-trader-landlord middlemen 281 Want creation 282 Credit to producers 283 Collection, aggregation and distribution processes 285 Communication of information on supply-demand conditions 287 Entrepreneurship and mobilization of resources 287 Market speculation 288 Number of middlemen 289 Market-exchange system with merchant-trader 291 Proportion of production marketed 300 Size of production unit 301 Production of edible versus nonedible commodities 305 Market Efficiency 306 Technical versus economic efficiency 307 Static versus dynamic efficiency 309 Signals through the pricing mechanism 309 Resource mobility under price changes 311 vi Page Marketing margins 313 Product differentiation 315 Equalization of prices 316 Public Investment in the Economy's Infrastructure 317 Returns to private investment 320 Need for an Efficient Marketing System 323 Literature Cited 328 CHAPTER VII. GOVERNMENT PROGRAMS AND POLICIES 331 Public Price Policies 334 Acreage response to output price relationships 339 Acreage response to prices plus additional inde pendent variables 357 Yield response to price relationships 364 Quantities marketed as a function of market prices 370 Public price supports, ceilings, and subsidizations 386 Monetary and Fiscal Policies Affecting the Agricultural Sector 388 Monetary policies 390 Fiscal policies 393 Personal income tax 399 Property taxes 402 Turnover taxes 405 Tax on production inputs 40? Import and export taxes 408 Marketing boards 410 vi L Page Agricultural Extension Services 412 Other Public Programs and Policies 419 Literature Cited 421 CHAPTER VIII. VALUES, ATTITUDES AND OBJECTIVES OF AGRICULTURAL ISTS AS PRODUCERS AND CONSUMERS 425 Religion 430 Hinduism 433 Islam 436 Buddhism 438 Traditional African religion 440 Civil-religious hierarchy in Latin America 443 Extended Family 445 Other Values and Attitudes Influencing Individuals' Objectives 452 Objectives 467 Savings 478 Investment 481 Nonproductive investment 483 Productive investment 485 Literature Cited 489 CHAPTER IX. INTEGRATIVE APPROACH TO AGRICULTURAL DEVELOPMENT 495 Production 497 Outputs and valuations 498 Working capital constraint 498 Land constraint 501 viii Page Implicit production function 501 Marginal conditions for economic efficiency 502 Exchange Economy 505 Case 1: Planned Production Equals Planned Consumption 509 Case 2: Actual Production Exceeds Planned Production of q^ 512 Case 3: Actual Production is Less Than Planned Production of q 518 ^n Case 4: Production in Terms of Exchange Values With "Surpluses" Generated by Several Producers 521 Larger quantity of goods available for consumption 531 Change in the terms of trade 532 Degree of exploitation by the merchant-trader 534 Case 5; Introduction of Government Programs 534 Public investment in the form of food assistance 536 Public investment in the infrastructure of the agricultural sector 540 Public pricing policies 543 Case 6: Economic Decisions in Terms of Market Conditions With Intertemporal Private Investment 545 Saving and lending decisions 549 Investment decisions 554 Partial Equilibrium in the Input Market 557 Net suppliers of q^, q^, and q^ 563 Landless laborers and net suppliers of q^ 563 i X Page Producers with positive excess demand for credit, q^, for use in procuring q^, q^, and q^ 564 CHAPTER X. FRICTION POINTS OF AGRICULTURAL DEVELOPMENT: SUMMARY 566 Production 570 Working-capital constraint 574 Tenure Arrangement 576 Opportunity cost component, M' 577 Consumption 578 Price elasticity of demand for direct consumption, g 578 Income elasticity of demand for direct consumption, h 580 Private Investment 582 Initial investment cost 582 Estimated net returns 583 Discount factor, P 583 Length of planning horizon, n 584 Summary 585 LITERATURE CITED 590 ACKNOWLEDGMENTS 605 APPENDIX A: TABLES 606 Literature Cited 614 APPENDIX B: KRISHNAN'S FORMULATION FOR PRICE ELASTICITY OF MARKETED SURPLUS 615 APPENDIX C: ALTERNATIVE FORMULATIONS FOR PRICE ELASTICITY OF QUANTITIES MARKETED 619 APPENDIX D; DERIVED SHORT-RUN DEMAND FOR LABW AND CAPITAL 625 1 CHAPTER I. INTRODUCTION As economic development proceeds, the agricultural sector typically declines in relative economic importance. But this does not imply that the agricultural sector is relatively unimportant in developmental process- as. To the contrary: the starting point for economic development is man's use of land and its inherent resources. The application of labor and man's ingenuity to using these resources largely determines the prod uct forthcoming and, in turn, the physical level of living. In the Malthusian state, this level of living is low and essentially constant. However, the Malthusian doctrine minimizes the importance of man's in genuity in altering his environment. Man has not always made good use of his physical and human resources. Societies have advanced, economically and culturally, only later to decline and even disappear. At the earliest stages of economic development^, the agricultural