Purdue University Purdue e-Pubs Open Access Theses Theses and Dissertations January 2016 MEASURMENT AND ANALYSIS OF AGRICULTURAL PRODUCTIVITY IN COLOMBIA Manuel Ignacio Jimenez Purdue University Follow this and additional works at: https://docs.lib.purdue.edu/open_access_theses Recommended Citation Jimenez, Manuel Ignacio, "MEASURMENT AND ANALYSIS OF AGRICULTURAL PRODUCTIVITY IN COLOMBIA" (2016). Open Access Theses. 1214. https://docs.lib.purdue.edu/open_access_theses/1214 This document has been made available through Purdue e-Pubs, a service of the Purdue University Libraries. Please contact [email protected] for additional information. Graduate School Form 30 Updated PURDUE UNIVERSITY GRADUATE SCHOOL Thesis/Dissertation Acceptance This is to certify that the thesis/dissertation prepared By Manuel Ignacio Jimenez Entitled MEASURMENT AND ANALYSIS OF AGRICULTURAL PRODUCTIVITY IN COLOMBIA For the degree of Master of Science Is approved by the final examining committee: Dr. Phillip C. Abbott Chair Dr. Kenneth A. Foster Dr. John H. Sanders To the best of my knowledge and as understood by the student in the Thesis/Dissertation Agreement, Publication Delay, and Certification Disclaimer (Graduate School Form 32), this thesis/dissertation adheres to the provisions of Purdue University’s “Policy of Integrity in Research” and the use of copyright material. Approved by Major Professor(s): Dr. Phillip C. Abbott Approved by: Dr. Gerald E Shively 8/19/0201 Head of the Departmental Graduate Program Date i MEASUREMENT AND ANALYSIS OF AGRICULTURAL PRODUCTIVITY IN COLOMBIA A Thesis Submitted to the Faculty of Purdue University by Manuel I. Jimenez-Useche In Partial Fulfillment of the Requirements for the Degree of Master of Science i December 2016 Purdue University West Lafayette, Indiana ii ACKNOWLEDGEMENTS I would like to thank Dr. Philip Abbott for guiding me throughout the entire process while conducting this study. His solid understanding of this topic and his accurate comments allowed me to successfully develop this project. His insights about how I should do it, and what the results should look like were key for achieving the project goals. I also want to thank him for believing in my proposal for developing an ambitious project like this, about a country with which he was not very familiar. Last, I greatly appreciate his patience, time and cooperation for completing this document. I would like to acknowledge the help I received from the other members of the thesis committee. Dr. Foster, thank you for your insights for the developing of this project. Your constant challenges to improve this research allowed me to advance further than I expected. Dr. Sanders, thank you for always being willing to give me support and to contribute to this research. Thanks for providing me with a different perspective to solve the obstacles I encountered. ii I would also like to thank the people from the National Department of Statistics of Colombia (DANE) and Colombia's Central Bank (BANREP) for providing part of the data used in this study. iii I’m also very grateful to Lauren Mallett for her editorial assistance. This document would not be completed without her editing remarks. To my parents, my sister and all my family in Colombia and here in the US, thank you for support and all your words of encouragement. To my wife, thank you for her unconditional support and for believing in me. I love you and I would never forget all you did for me and for our family while I was conducting this research. Finally, to my son, thanks for being my inspiration. I studied this Master and made all this effort to ensure that you will enjoy a better future. iii iv TABLE OF CONTENTS Page LIST OF TABLES .................................................................................................................. viii LIST OF FIGURES .................................................................................................................. xi ABSTRACT .......................................................................................................................... xiv CHAPTER 1. INTRODUCTION ......................................................................................... 1 1.1 Agricultural Commodity Price Boom in 2006 to 2011 and Colombia's Agricultural Backwardness ............................................................................................. 1 1.2 Colombia’s Agricultural Productivity ................................................................ 4 CHAPTER 2. COLOMBIA’S AGRICULTURAL SECTOR (1970-2014) .................................. 6 2.1 Introduction ...................................................................................................... 6 2.2 Importance and Dynamics of Colombia’s Agriculture ...................................... 8 2.3 Colombian Agricultural Policy from 1970 to 2015 ......................................... 16 2.3.1 Political Economy of Agricultural Policy ..................................................... 16 2.3.2 Assessment of Agricultural Policy in Colombia ........................................... 28 2.4 Main Facts about of Colombia’s Agriculture .................................................. 34 2.4.1 Land Use ...................................................................................................... 34 iv 2.4.2 Agricultural Production ............................................................................... 40 2.4.3 Value of Agricultural Production ................................................................ 47 2.4.4 International Trade in Agriculture .............................................................. 51 2.4.4.1 Agricultural Exports ................................................................................. 51 2.4.4.2 Agricultural Imports ................................................................................ 55 2.5 Main Problems for Colombia’s Agriculture .................................................... 58 v Page 2.5.1 Low Expected Returns ................................................................................ 60 2.5.1.1 Low Returns ............................................................................................. 60 2.5.1.1.1 Human Capital ..................................................................................... 61 2.5.1.1.2 Land Use .............................................................................................. 63 2.5.1.1.3 Agricultural Infrastructure .................................................................. 65 2.5.1.1.4 Access to External Markets ................................................................. 67 2.5.1.2 Low Land Ownership ............................................................................... 68 2.5.2 Funding Problems ....................................................................................... 69 2.6 Conclusions ..................................................................................................... 73 CHAPTER 3. RELEVANT LITERATURE ........................................................................... 80 3.1 Introduction .................................................................................................... 80 3.2 Most Common Applications of Agricultural Productivity Measurement ....... 82 3.3 Determinants of Agricultural Productivity ..................................................... 86 3.4 Agricultural Productivity in Colombia ............................................................. 92 3.5 Conclusions ..................................................................................................... 94 CHAPTER 4. METHODOLOGIES FOR MEASURING AGRICULTURAL PRODUCTIVITY .... 97 4.1 Introduction .................................................................................................... 97 4.2 Theoretical Framework .................................................................................. 98 v 4.3 Measurement of Agricultural Productivity ................................................... 105 4.3.1 Primal Techniques ..................................................................................... 107 4.3.1.1 Cobb-Douglas Production Function ...................................................... 107 4.3.1.2 Constant Elasticity of Substitution – CES Production Function ............ 109 4.3.2 Dual techniques ........................................................................................ 116 CHAPTER 5. DATA ...................................................................................................... 124 5.1 Output ........................................................................................................... 124 5.2 Inputs ............................................................................................................ 125 5.2.1 Capital Stock .............................................................................................. 125 5.2.2 Farm Labor and Wages ............................................................................. 127 vi Page 5.2.3 Fertilizers ................................................................................................... 129 5.2.4 Animal Feed .............................................................................................. 130 CHAPTER 6. RESULTS AND DISCUSSION .................................................................... 132 6.1 Introduction .................................................................................................. 132 6.2 Results ..........................................................................................................