THE IMPACT OF FARM MECHANIZATION ON SMALL-SCALE RICE PRODUCTION Y OLANDA L . TAN MASTER OF SCIENCE (Agricultural Economics) March , 1981 THE IFPACT OF FARM MECHANIZATION ON SMALL-SCALE RICE PRODUCTION YOLANDA L. TAN SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF THE PHILIPPINES AT LOS BmOS IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE (Agricultural Economics) March, 1981 The thesis attached hereto entitled: THE IMPACT OF FARM MECHANIZATION ON SMALLeSCALE RICE PRODUCTIONp prepared and submitted by YOLANDA L. TAN, in partial fullfillment of the requirements for the degree of Master of Science (Agricultural Economics), is hereby accepted: BART DUFF' Member. Guidance Committee Member, Guidance Committe fl. /- TIRSO B. PARIS, Adviser and Chairman Guidance Committee 3-&rP/ (Date) Accepted as partial fullfillment of the requirements for the degree of Master of Science (Agricultural Economics). DOLORES A. RAMIREZ Dean, Graduate School University of the Philippines at Los Ba5os BIOGRAPHICAL SKETCH Yolanda L. Tan was born in San Pablo City, Laguna on October 17, 1956. She finished her high school education in 1974 at the Laguna College in San Pablo City. In the same year, she was awarded the local State Scholarship grant to pursue undergraduate studies at the University of the Philip- pines at 1.0s Baiios. She finished her college education in 1978 with the degree of Bachelor of Science in Statistics. After graduation, she joined the Commerce Department's teaching staff of the Laguna College. In 1979, she was granted J' an IAPMP (Integrated Agricultutal Productivity and Marketing Program) Fellowship to pursue a Master's degree in Agricul- tural Economics at the University of the Philippines at Los Bafios. For her thesis work, she was awarded a partial sholar- ship by the International Rice Research Institute as a Research scholar. Presently, she is an instructor in the Economics Department of the College of Development Economics and Manage- ment, UP at Los Baiios. iii ACKNOWLEDGEMENT My most sincere gratitude and profound appreciation to my advisers: Dr. Bart Duff, Associate Agricultural Economist at the International Rice Research Institute (IRRI), Dr. Tirso B. Paris, Jr., Chairman and Assistant Professor, College of Development Economics and Management (CDEM), University of the Philippines at Los Bafios (UPLB) , and Dr. Corazon T. Aragon, College Secretary and Assistant Professor, CDEM, UPLB for their constructive criticism and guidance in the preparation of this thesis. Similar gratitude and appreciation are also extended to Dr. Paul G. Webster, Visiting Agricultural Economist at IRRI, Dr. John A. Wicks, Associate Agricultural Economist at IRRI and Dr. Hans P. Binswanger, former Agricultural Development Council (ADC) Associate for India, for their valuable help in clearing important details of the methodol~gyof the thesis. To the Integrated Agricultural Productivity and Marketing Project for providing a fellowship to pursue a Master's degree in Agricultural Economics at UPLB. To the International Rice Research Institute for providing a partial thesis support. Warm thanks to my roommates, Jerome and Precee, for their good company and help in the preparation of the data used in this thesis. To the Section's programmers, Murphy, Edith and Alice, who helped in the processing of the data, our secretaries, Lydia and Hedda for their excellent typing job and my col- leagues at the Economics section of the Agricultural Depart- ment, Fleur, Rigs, Mely, Bardz and Cellie, who made my short stay at IRRI fruitful and enjoyable. To Meyra, Puring and the rest of my classmates for sharing with me the hard times and good times of our course works. And lastly, to my parents and brothers, whose love, encouragement and moral support served me inspiration to complete my graduate work. TABLE OF CONTENTS CHAPTER PAGE I INTRODUCTION .................. 1 1.1 Problem .................. 1 1.2 Objectives ................ 3 1.3 Hypothesis ................ 3 II REVIEW OF LITERATURE .............. 6 2.1 History of the Growth of Farm Mechanization in the Philippines ............ 6 2.2 Related Literature on Production Effects of Mechanization ............. 8 2.3 Survey of the Literature on Decomposition Analysis ................. 11 I11 RESEARCH METHODOLOGY .............. 17 3.1 Decomposition Model I (Arithmetic Decomposition Technique) ... 17 3.2 Decomposition Model I1 (Employing the Use of Production Function Framework) ................ 24 3.3 SourceofData ............... 31 3.4 Sampling Procedures ............ 32 IV STUDY AREA AND CHARACTERISTICS OF SAMPLE FARMS . 34 4.1 Study Area ............... 34 4.2 Characteristics of Sample Farms ...... 36 V RESULTS AND DISCUSSION ............. 41 5.1 Results of the Arithmetic Decomposition Scheme ................... 41 CHAPTER PAGE 5.2 Results of the Decomposition Scheme Using the Production Function Framework ................ 59 SUMMARY ANDCONCLUSION ............ 70 LITERATURE CITED ... APPENDIX I .................. 76 APPENDIX 11 ................ 80 APPENDIX 111 .................. 82 APPENDIXIV ................. 83 APPENDIX V .................. 84 LIST OF TABLES TABLES PAGE Distribution of Sample Farms by Municipality and Barrio, Nueva Ecija, Philippines, 1979 ... 35 Distribution of Sample Farms by Type of Power Used in Land Preparation and Irrigation, Nueva Ecija, Philippines, Wet Season, 1979 ...... 37 Demographic Characteristics of Sample Farms by Type of Mechanization, Nueva Ecija, Philippines, Wet Season, 1979 ............... 3 8 Characteristicq of Sample Farms by Type of Mecha- nization, Nuevn Ecija, Philippines, Wet Season, 1979...... ............... 39 Test for Differences of Variables Between Tractor and Carabao Farms Using the Kruskal-Wallis One- Way Analysis of Variance by Ranks ....... 42 Means of Var.iables Used in Applying the Arith- metic Decomposition Analysis, Wet Season, 1979 and Dry S'eason, 1980 ............. 44 Decomposition Analysis (Without Interaction Terms) of Output Differences Between 2-wheel Tractor and Carabao Farms .......... 45 Decomposition Analysis (Without Interaction Te~rns)of Output Differences Between 2-wheel Tractor and Carabao Farms with Price Variable . 45 Decomposition Analysis (With Interaction Terms) of Output Differences Between 2-wheel Tractor and Carabao Farms ............... 46 Decomposition Analysis (with Interaction Terms) of Output Differences Between 2-wheel Tractor and Carabao Farms with Price Variable ..... 4 7 Decomposition Analysis (Without Interaction Terms) of Outnut Differences Between 2-wheel/ 4-wheel Tractor Combination and Carabao Farms 5 1 TABLE PAGE 12 Decomposition Analysis (Without Interaction Terms) of Output Differences Between 2-wheel/ 4-wheel Tractor Combination and Carabao Farms with Price Variable ............ 51 Decomposition Analysis (With '~nteractionTerms) of Output Differences Between 2-wheel/4-wheel Tractor Combination and Carabao Farms .... 52 Decomposition Analysis (With Interaction Terms) of Output Differences Between 2-wheel/4-wheel Tractor Combination and Carabao Farms with Price Variable ...................53 Cropping Intensity of Sample Farms by Type of Power Used in Land Preparation and Irrigation, Wet Season, 1979, Dry Season, 1980 ...... 56 Cropping Intensity of Sample Farms by Type of Power Used in Land Preparation and Irrigation, Wet Season, 1979, Dry Season, 1980 ...... 58 Estimated Coefficients of the Cobb-Douglas Production Function for the 2-wheel Tractor Farms.............. ...... 60 Estimated Coefficients of the Cobb-Douglas Production Function for the Carabao Farms ...61 Estimated Coefficients of the Cobb-Douglas Production Function for the 2-wheel/4-wheel Tractor Combinat ion Farms ...........62 Test for Structural Differences in the Produc- tion Functions for 2-wheel Tractor and Carabao Farms Using the Dummy Variable Approach ... 65 Means of Variables Used in Applying the Decom- position Analysis Using the Production Function Framework, Wet Season, 1979. ......... 67 Decomposition Analysis of Per Hectare Yield Differences Between 2-wheel Tractor and Carabao Farms .................... 68 APPENDICES APPENDIX PAGE I Mathematical Identities ........... 1. Identity I ................ 2 . Identity I1 ............... 3 . Identity 111 .............. I I The Kruskal-Wallis Test ........... I11 Mathematical Transformation ......... I V Nitrogen Content of Organic and Commercial Fertilizers ........... V The Chow's Test .............. ABSTRACT TAN, YOLANDA L., University of the Philippines at Los Bafios, March 1981. The Impact of Farm Mechanization on Small- scale Rice Production. Thesis adviser: Dr. Bart Duff. The objective of this study is to quantitatively assess the impact of farm mechanization on output. Production effects of mechanization were evaluated through the use of decomposition analyses. First, an arithmetic decomposition analysis was employed to disaggregate output differences between mechanized and non-mechanized farms into its component elements, i.e., , . yield, price, area and cropping intensity component plus the interactions of these components. Results of the analysis showed that the most important factors that brought about output differences between the mechar~izedand non-mechanized farms were cropping intensity and yield. Secondly, yield effect of mechanization was investigated by using another decomposition technique employing a production function framework. The model decomposed total yield differences between the mechanized and nan-mechanized farms into