Chapter I: Introduction
1.
Origin of the study
Since the agriculture has been recognized a central role in
generating overall economic development, much attention has been given to
identify the ways to accelerate its growth. The literature of economics has a
common notion that agriculture plays a key role in the early stage of
structural transformation. It has encouraged economists to systemize the process
of economic growth into framework sequential stage (Rostow, 1990) in which
agricultural growth is considered essential to induce the industrialization
process (Mellor, 1995). In reality, there have been very few low-income
countries that have achieved rapid non-agricultural growth without
corresponding growth in the agriculture. The roles of agriculture in economic
development are highlighted by Johnson and Mellor (1961), and shared by Kuznets
1961.
In Vietnam, about 78 percent of the total
population and 70 percent of the labor-force are living in rural areas where
the organizations and activities of agricultural services and inputs supply for
the farmer have existed for a long time. Rural agricultural economy, forestry
and aquaculture capture nearly 30 percent in total export
value and 25 percent of GDP
that is continuously increasing. The agricultural production and rural economy
has a paramount importance in ensuring the sustainable development of any
nation, and is a leading sector in the renovation process of Vietnam.
By fully applying the renovation process in the whole country,
many new factors are emerging from all social economic issues, in which farm
economy is a new concern in agricultural production and rural development in
recent years. Although farm economy is primary, it has affirmed its importance
and development prospects. Farm economy has been widely developed and had a
large share in agricultural production in which family farm is the main force.
Family farms occupy most cultivated land and a main producer of agricultural
products. According to statistical data, Vietnam now has about 113,000 farms,
attracting large number of laborers (about over 10 percent of the total farm
households). They are planting over 600,000 ha of bare hills. Farm owners have
invested a great amount of capital (about VND 28 trillion in these farms). They
employed workforce for thousand of laborers and provide food and agricultural
products worth approximately VND 14 trillion per year, accounting for 12 percent
of the total agricultural output of the country. In accordance with
agricultural cooperatives, and state-owned agricultural enterprises, the family
farms have played a certain role in the agricultural production and rural
development.
While many researches on various subjects and topics are partly
undertaken by several authors, Universities and Institutions such as Tran Duc
(1998), Nguyen Dien and Tran Duc (1993), Nguyen Dien (1997), Frank E., (1993),
and Maurice B., (1993), but none of the subject on farm income and determinants
of farm income have been done except some reports and articles. Therefore it is
timely for Vietnam to undertake the study on determinants of family farm
income.
2.
The scope and focuses
The study tries to identify theories of farm economy, related
issues to farm and advantages and disadvantages to farm development.
It
also try to define what factors and how they affect family farm income in
Vietnam.
From
the regression results, we can make some suggestions to further farm development
and celebrate farm income in Vietnam.
3. Research questions
The study will focus on addressing the following questions:
1. What
are the contributions of the family farm economy to agricultural-rural
development?
2. How
have family farms performed in recent years?
3. What
are the favorable and unfavorable conditions to farm development?
4. What
are the determinant factors and how do they affect family farm income?
5. What
are the recommendations for increasing farm income and accelerating farm
development in Vietnam?
4.
Research methodology
This thesis will firstly review the fundamental issue relating
to the family farm economy in Vietnam. Then it will be focused on descriptive
and tabular analysis of the farm performance and quantitative analysis of
determinants of family farm income by using econometric technique and
hypothesis testing with the support of SPSS software. Therefore, the
analysis will employ both qualitative and quantitative techniques.
5.
Structure of the thesis
The thesis is presented in five chapters and bibliography.
Chapter I generally present the origin, scope, research methodology, research
questions, and structure of the study. Chapter II provides a theoretical and analytical framework and literature
review. Chapter III examines the development of farm in Vietnam in context of
history, performance, and favorable conditions as well as challenges to farm
development. Chapter IV attempts to quantify effects of
explanatory variables on income of farm. Chapter V will
bring remarks, and recommendations drawn from the analysis to stimulate farm
development and increase farm income in Vietnam.
Chapter II: THEORETICAL AND ANALYTICAL FRAMEWORK
1.
Concepts and definitions
As mentioned in
the thesis, from different approaches and point of view of the authors, there
is a certain definition of family farm. There are some definitions of family
farm which are widely used in economics research and in the reality, but a
concept A quoted concepts of family farm is that family
farm is a farm in which the family or household supplies labors, equity
capital, and management. No distinction is made between managerial labor and
the labor used to plant crops, feed animal, milk cows, and so on. Farming
operations are followed by market signals and close to markets. It is a type of
agricultural production in which family labor captures more than 50 percent of
the total labor working on the farm; and hired workers also contribute to
farming activities. The family farmer still plays a multiple role, he is an
owner, worker, manager and marketers, and markets are open to him. Family farm is an autonomous decision making unit, which
decides how to use of the resources of production efficiently.
According to the
Resolution N0 03/NQ-CP of the Government (dated February 2, 2000),
family farm is a basis organizational unit for agricultural, forestry and
fisheries production. Input is possessed by an independent owner; the
production activities are performed on large area of land and all necessary
factors of production are managed with modern knowledge and advanced
technology. The owners are self-reliant and must base their production on the
market. It is of a higher level of development than small farm household is; it
is suitable to be transformed from subsistence-agriculture to
commodity-agricultural production in structural change of the
agricultural-rural economy.
Farm income in this sense is commonly defined as
that derived from farm operations. It is that the gross output minus
expenditure in production, wage of hired labor and other costs. The annual
income of a family farm is the total of money received by the family from all its
members working on the farm within one year. Thus, family farm income includes
income of the farm owner (wages of management laborers, and direct laborers),
income of all family members directly working on the farm, and net profit of
the farm. In this context, the income of farm owners and family laborers can
not be clearly separated.
2. Related issues to farm
2.1 Large farm versus small farm
2.2 Farm size and productivity
There are many studies on the farm size in relation with its
productivity, but the results are conflicting. Some studies found a positive
relationship between farm size and productivity [data of West Godavari 1969 –
1970 by Deolalikar (1981); a study by Feder (1985); and Carter and Kanfayan
(1989)], but most studies found an inverse relationship between farm size and
productivity. In general, these studies demonstrate a higher productivity on
small farm than large ones. Many studies have been
publicized that support the inverse relationship between farm size and
productivity. In the thesis, this issue will also be examined to affirm
that the inverse relationship between farm size and productivity is existing.
3. Contributions of family farm to
agricultural production and rural development
In accordance with farm cooperatives, and
State farms, the family farm has played a central role in agricultural
production and rural development. Almost all family farms are located in rural
areas where are most of population and large a share of labor-force. Family
farms have existed for hundreds of years. In the market economy with high
competition, family farms are dominant in the developed and developing
countries where the farm cooperatives and State farms are inefficient and they
need to be reformed. Thus, family farms are corollary encouraged developing.
The family farm economy has the ability to apply all different levels of
management in agricultural production with different size, specialization,
technology and a combination of others like small households, cooperatives, and
state farms. Family farms mobilize the family capability in capital, labor
force for enlarging production, land reclamation, crop multiplication of
intensive techniques with better quality variety of crops and animals, rational
fertilization, improved farming tools and implementation toward market
direction. They also wake up the potentials of land, labor,
capital, and other inputs to contribute to agricultural production and rural
development. In accordance with the roles of Agriculture, family
farm can contribute to agricultural-rural development in terms of GDP,
surpluses to society, encourage of local business and trade, job creation, food
security and poverty alleviation, and environment protection.
4.
Study settings
In this section,
author described the farm survey and theory base for setting up the model. As
mentioned in the thesis, farm survey was carefully prepared and undertaken in
1999 following the Decision N0
159/CP-NN dated 13 February 1999 by Prime Minister.
The farm survey was undertaken from March to
September 1999 in 15 provinces of Vietnam. These farms were selected to present
the range of agroecological and human settlement patterns observed in the
provinces. Each interviewer had responsibility for a quota of farms and only
completed an average of two farms each hard weak. They had to visit farm at
least three times and sometimes up to seven times with the help of local
officials at the first meet. Most questionnaires were recorded on the farm,
where the farm head always had responsibility during the day, and the rest were
held in the evening when farm heads returned home from work. Each completed
questionnaire included confirmation of three people: interviewer, farm head,
and local officials.
The questionnaires were designed to be a
point-in-time study generating cross-sectional data for analysis. With the
principle of accuracy, understanding of many aspects of farm economy in Vietnam
at that time, the questionnaires covered the following fields:
-
General information about surveyed farms
-
Information about factors of productions of farms
-
Data and main sources of farm revenue
-
Data recording costs of farm operations
-
Information about related issues of farm development by asking
farm heads and local officials.
With the good staff training, good
questionnaires, assistant of local government, and with the help of entry
program errors were reduced to reasonable levels (6 farms were deleted from the
database of 306 farms in Binhduong sample, approximately 2% of total
observations because of excessive errors and missing data).
Another aim of this section is to present
theory base for setting up model in order to define which factors and how they
affect to family farm income in Vietnam. As mentioned in the thesis, studying
factors determining family farm can be seen from the production function that
would look much like a production function of Cobb-Douglas form. According to
Neoclassical, it has spent more and more inputs to produce the same additional
volume of outputs. This phenomenon can be explained by the decreasing marginal
product of inputs. In the reality, the production function is non-linear rather
than linear one. In the farm production, output (or income) of farm can be
expressed in the familiar Cobb-Douglas form, which is translated into an
equation linear in logarithms. This form has the drawback that is
multiplicative, and additive in all variables.
In the first case of multiplicative, the
absence of any variable (such as nonuse of some exogenous input) means zero
output (or income). This problem has been remedied by including dummy variables
respecting instance of the nonuse or non-occurrence that only make instance of
intercept of the equation differs but all other coefficients remain the same.
The original equation is
When taking the natural
logarithm, we can obtain:
LnQ = LnA + åaiDi
+ åbjXj + å LnFi
(2)
Where: A is a parameter
of total factor productivity; Di is a set of dummy representing
characteristics of farm head; Xj is a set of dummy representing
characteristics of farm; and Fi is vector of farm assets. The
equation (2) is a form of log-linear, which allows us to estimate coefficients
for total factor productivity of all variables in logarithm forms.
In the second case of
additive, the form has the drawback that is an additive in all variable, so
that the absence or appearance of any variable (such as nonuse of some exogenous
or use of some endogenous) make output different from zero. This problem can be
checked by testing the function form for specification, if the test is
satisfied the equation can be used for estimating coefficients.
LnQ = LnA + åaiFi + åaiDi
+ åbjXj (3)
The additive equation
has a form of log-lin from which can be used to estimate a relative change in
dependent variable associated with an absolute change in independent variables,
if other thing constant.
Both types of additive and multiplicative
forms are easily used to estimate coefficients by the OLS technique and widely
apply in the reality. One more application of thesis forms can be seen in the
chapter IV of the thesis.
5
The empirical Evidences
In this section,
family farm economy of countries in transition like Vietnam, are going to be
studied. Specifically we will look at farm structure, its roles in their
economy, and what lessons we can draw from discussion. Those countries
concerned in this study are the cases of Estonia and China.
After studying the farm structure of Estonia
and China, it is apparent that family farms are generally dominant in farm
structure, and agricultural production, while they are mostly small (less than
15 hectares), owned by farmers and located in the countryside. The family farms
also tenure large share of land use, and significant contributions to GDP and
income of rural residents. The family farms are mostly newly founded from
transforming State farms via privatization and lease. There is a noticeable
trend that family farms have increased in number, and have potential for
development. They play a central role in agricultural production and rural
development, creation of jobs, elimination of poverty, and improvement of
living standard. Development of farm economy is necessary to transform the
subsistent agriculture production to commodity one. In the case of Guangdong
province, farm income is strongly affected by labor and capacity to access
major infrastructures, and farm assets. Its income also has an inverse
relationship with education level and distance to nearest markets. The table
also shows that characteristics of farm head impact on income of farm. Theses
are important references to set up the model for defining factors that
determine farm income in Vietnam.
Chapter
III
: DEVELOPMENT OF FARM ECONOMY IN VIETNAM
1.
Background of farm development in Vietnam
The history of Vietnamese nation in general,
the economy and agriculture in particular is a long and very complicated story.
Its complication has redoubled since 1954, when Vietnam was partly liberated
from French colonialism. According to the Geneva Treaty, Vietnam was divided
into two parts: the North (the Democratic Republic of Vietnam - DRV), and the
South, which was under control of the USA until it was completely liberated in
1975. Thus, there were two different regimes of agricultural
production that were set up in the two regions. In the North, agricultural
production based completely on the state-owned farms and collectives via
collectivization. State farms were mostly located in the remote rural areas and
mountainous areas aimed at stimulating new economic regions, rearranging rural
labor force. In parallel with the State farms, cooperatives were dominant in
agricultural production in the North, rapidly increased in quantitative term,
but did not follow the “principle of willingness”. This was one of the reasons
that pushed agricultural production into the late
crisis.
In the South of Vietnam, during the wartime,
plantations, cooperatives, and commodity production households were three
forces of agricultural production in which plantations were dominant. According
to the Ministry of Labor of Saigon government, in 1962 there were total 755
plantations specialized in rubber, tea, coffee, and others.
After national reunification in 1975, period
from 1975 to late 1980s was dominant by state farms and
cooperatives. Vietnam’s agriculture was unified in one with the potential and
strength of the North and South, which supplemented each other to jointly
develop toward one direction, i.e. the socialist agriculture. However, agricultural production did not develop, but went into
depression. Farmers turned their back to cooperatives, and went in hand with
family economy. Income from family economy activities was two-third in family
budget or higher in some regions. Many cooperatives and production groups were
bankrupted, and the rest had been existing on the document only.
In brief, collectivizing agricultural
production in the North, Vietnam took one step backward while implementing
collectivization in the South, Vietnam took two steps backward [Pham Nhu Cuong,
(1991), cited in Ngo Thi Men, (1995)]. Collectivization process and foundation
of state owned farms in the centrally planned economy, the households lost
their inherently autonomous right. In the
agriculture, land and other factors of production were collectivized
completely; household economy was minor family economy, private and individual
economic activities were prohibited. Therefore, commodity agriculture returned
to subsistent one, farm economy lost the foundations of its existence.
Permeating the policy on comprehensively
social-economic renovation sent out by the 6th Congress of the
Communist Party of Vietnam, the Resolution N0 10 by Politburo
defines further renovation of agricultural management mechanism, under which
farming household was an autonomously economic unit, especially in rural areas.
After the introduction of the Resolution N0 10, Vietnam’s
agriculture and rural economy entered a new and relatively stable development
stage. With the aim of liberating production forces, mobilizing potential
strength of all economic sector, transforming agriculture into commodity one,
solutions were carried out according to the Resolution N0 10.
Production means and cooperatives’ land were assigned to farming households for
long-term use from 10 to 15 years under the form of contracts or bidding.
Family, individual and private economies were encouraged to autonomously make
rich. Households became the principal production units in the countryside and
had complete freedom in cultivating on contracted land. They began to invest
more to improve the land fertility and to buy mechanical farm equipment, cattle
and other means of production. Under the Resolution N0 10 and
accompanied policies, institutional and legal frameworks were relatively
completed for farm foundation and development. In order to promote farm
performance, incentive investment in agriculture, the Resolution N0
5 (June 1993) was issued. It consisted of renovating rural and agricultural
economic structure; practicing the policy on assigning long-term land use right
to farming household;
renovating state’s macro policies on agriculture and rural areas. It clearly
concretized policies for household, individual, private in agribusiness. In
addition, the Resolution also has affirmed long term existence of all economic
sectors in rural areas, of which the autonomous role of household economy is
ensured together with the renovation of cooperatives and state owned farms, and
individual and private economy are encouraged in rural areas. Under the impacts of renovation policies, especially the impacts
of the Resolution N0 5 the farm economy has initially boomed and
developed in many aspects. It is not doubt
the fact that the family farm economy new but efficient benefit to farmers and
society, waking up the potential of land, labor, capital, and promoting
economic-structural change. Farm economy has become a vital engine for
agricultural development in Vietnam.
2. Farm performance
Family farm
economy has been reserved in Vietnam for a short time. Almost all farms are
staying in stage of capital absorption and growing, especially forestry farms,
perennial crops, and orchard located in the North. However, farm performance is
significant in recent years. In order to evaluate the farm performance and farm
efficiency,
some indicators are commonly used like gross output, value of commodity
products, income, income per head, income per hectare of land use and so on.
2.1 Gross output of farm
The
gross output of a family farm is mainly come from farming activities, capturing
over 80 percent of the total output of a farm. It is easily
believed that the gross outputs of farm are very different between the regions
where farms located, between farming activities that farms specialized. They
are closely linked to natural, social-economic conditions in each region. To
take advantage of these conditions, increase farm income, farm owners need
experience, skill, and knowledge to exploit thoroughly the potentials of
certain region.
2.2 Value of commodity product
Commodity production is one of the most
dominant characteristics of farm economy. In order to measure the degree of
commercialization of a farm, two main criteria are commonly utilized: volume of
commodity value, and ratio of commodity product. The commodity value of a farm
is defined as volume of sales, even including seed, on the farm and in the
markets, meanwhile the ratio of commodity product is understood as a proportion
of commodity value to gross outputs. The high figure of commodity
ratio reflects a strong correlation to markets, and preeminence of farm
economy.
2.3 Farm income
As mentioned in Chapter II, the term
“income” referred herein is the net income. It is that the gross output minus
expenditure in production, wage of hired labor and other costs. Annual income
of a family farm is the total amount of money received by the family from all
its members working on the farm within one year. Thus, family farm income
includes income of the farm owner (wages of management laborers, and direct
laborers), income of all family members directly working on the farm, and net
profit of the farm. In this context, the income of farm owners and family
laborers can not be clearly separated. Income of family farm is
different between regions, farming activities, farm sizes, and characteristics
of farm owners. This thesis finds that family farm income and farm income per
family labor is very different among regions. According to the surveyed sample,
the average income of farm is the highest in the Central Coast Region, but the lowest
in the North Mountain Region. The highest level is 4.1 times as the lowest one.
The same trend for the farm income per family labor also occurred. It is
because these farms in the North Mountain Region have faced a shortage of
capital, skill labor to expand their production, and difficult access to
markets as well as unfavorable topography conditions. Most of farms in the
region specialized in perennial crops and growing forestry are unprofitable and
in the stage of capital absorption. These natural-social problems are closely
related to underemployment in the area. While in the Central Coast Region
farming activities in the region mostly specialize in aquaculture and annual
crops, which are annually profitable harvests. In addition, the infrastructure and
market systems in this area are relatively good, which lower marketing margin
and transaction costs.
From the surveyed sample, the income of
farms and income per family labor are closely associated with farming
activities. The forestry and orchard farms have a relatively low income and income
per family labor, while Pig and fishery farms has a high one. A season is that
over two-third of these orchard and forestry farms are newly established after
1993; they have been in stage of capital absorption and expansion of their
production. It took a long time for these farms to be exploitable and
profitable. Another reason is that these farms are mostly located in the hill
and mountainous areas, with difficulty of transport, lack of opportunities to access to the market. They are therefore limited in incentive
investment and input use in production, which leads to low productivity of
crops, and consequently low income. In the other hand, the farms raising pig
and aquaculture have a relatively high income and income per family owned
labor. It is because most of the farms are quarterly harvested, so they have
three or four crops per year. Furthermore, they are mostly located in flats and
crowded areas are actively involved in the market economy. They have adopted a
more commercial orientation, sold more their products, and expanded into the
production of cash crops. Where this happens, most researches show a highly
positive effect on income.
One unsurprising result here is that income
of farms is linked to education of farm owners. As a usual expectation, the
group of farms, which has the highest average income in Vietnam, are farm
owners having high school or higher level of education. According to the
surveyed sample, farm owners with high school certificate have the higher
income than primary and secondary ones. It is because
the farm owners with more educated are easy to capture the necessary knowledge
for doing farming, information about market such as demand, price, and time of
delivery for the best deals. It is reasonable
to expect that farmers with more educated level would be more likely to adopt
and then be more successful at managing the farm. The educated farmers will
take up new technique in the production, incentive crops, and crop multiple,
consequently raise income.
The average income of farms and income per hectare are
correlated to the farm size. From the analysis we find the existence of inverse
relationship between farm size and productivity. It is an evidence of
diseconomy to scale in agricultural production as mentioned in the previous
studies. The analysis also finds that farm holding 3 to 5 hectares are optimal
farm size in Vietnam in context of income, if holding other things equal. Moreover, income per capital input of a farm (or rate of return
of capital) is different from, and strongly associated with farm size. This
relation can be illustrated by an inverse U shape curve with the peak is at
farm size category of 3 to 5 hectares.
3. Advantages and disadvantages to family
farm development
Farm economy has widely established and rapidly grown in all
regions for a short time. Most of the farms are small, however they have
significant contributions to productive use of land, mobilization of capital
sources, and transformation of agricultural-rural economic structure toward
market direction. They also help to form specialized farms producing large
volume of commodity products and encourage processing industry in rural areas.
Their performance brings benefit to the economy and the country as a whole. These
achievements are resulted from advantages and attempts of government and
farmers. Some advantages to farm development can be addressed as follows:
government supporting policies, favor of natural-social conditions, advantages
of rural infrastructure and an unified market, technology progress
(biotechnology, chemical technology) and domestically produced machinery for
agriculture. However, farm development is facing with some disadvantages such
as inertia of policy, untitled land, inadequate and weak market system and
post-harvest processing, low education level of the farm owners, and shortages
of capital.
Chapter IV
:
DETERMINANTS OF FAMILY FARM INCOME IN BINH DUONG PROVINCE
1. Natural and social conditions
Binh Duong is a province located in the
Southeastern Region. It is adjacent to Bien Hoa City in the Northeast, to Ho
Chi Minh City in the South, to Binh Phuoc province in the Northwest, and to Tay
Ninh province in the West. Its total area is about 2716.1 square kilometers (km2).
Binh Duong's population (by 1st April 1999) is 716,427 persons of
which 67.4 percent are living in rural areas. Its total labour force is
345,700, accounting for 48.25 percent of the total population of which there is
56.4 percent directly working on the farm. Total agricultural and forestry land
is 215,728 hectare of which the existing perennial industrial crops and orchard
land is 1140,000 hectare, capturing 53 percent of total cultivated area. Its
topography is relatively flat, except for some granite mountain scatted in the
province. The temperature does not vary much between seasons. The temperature
is 27 degree Centigrade and the total average rainfall of the province is 2286
mm. Thus, the natural conditions have created a favour environment for growing
agriculture especially for perennial industrial crops.
In accordance
with favour natural condition, Binh Duong province has advantage of human
resource. The province has great potential labour-force, which is flexible,
active, hard learning and hardworking. There are many people from
different provinces are settling and working in the province. They have a lot
of farming experiences, and knowledge of market economy. They could allow the
province to diversify different crops toward market direction, exploit
potential resources for development, and make contributions to construct and
develop the province's economy.
2.
Model Specifications
Theoretically, income from farming
activity of the family farm is the difference between receipts (including sales
revenues in cash and in kind) and expenditures incurred by the activity
(including physical costs, hired labor costs, and other costs). Thus this
measure of the income will firstly include the returns to all factors of
production: (i) all paid and unpaid family labour and (ii) family-owned
physical capital and land. Secondly, the characteristics of the farm head may
be important. Age, sex, and level of education may affect the overall
performance of the farming activity and income. Thirdly, the income is likely
to be affected by the characteristics of the farm. Farm size, cropping
patterns, time of farm operation may affect the income of farm. Fourthly, the
income is also influenced by the characteristics of infrastructures in the area
farm located.
In the farm production, output (or income)
of farm can be expressed in the familiar Cobb-Douglas form, which is translated
into an equation linear in logarithms. This form has the drawback that is
multiplicative, and additive in all variables. The original equation is
When taking the natural
logarithm, we can obtain:
LnQ = LnA + åaiDi +
åbjXj +
å
gi
LnFi (2)
Where: A is a parameter of total factor
productivity; Di is a set of dummy representing characteristics of farm head;
Xj is a set of dummy representing characteristics of farm; and Fi is vector of
farm assets. The equation (2) is a form of log-linear, which allows us to
estimate coefficients for total factor productivity of all variables in
logarithm forms. In the case of study, to estimate the total factor
productivity of farm production in Binhduong province we include asset
variables such as capital, labour, and time of farm operation; and category of
farm size. This equation excludes land use or farm size because inclusion of
land use and category of farm size variables can cause a simultaneity bias for
OLS estimates. To remedy such a bias, land-use variable is excluded from the
model. In the following, the model without inputs of land use is referred to as
the “reduced-form specification”.
LnQ = LnA + a1LnCAP
+ a2
LnLAB + b1TIM
+ b2
LUR + å
gi
FSC +Uq (3)
Where A is parameter, CAP
is total capital of a farm in million dong, LAB is total number of labour
working on the farm, TIM is time of farm operation in year, LUR is a dummy
variable denoting land use rights of farm, and FSC is a set of farm size
categories, and Uq is the stochastic influences on gross output of
farm.
In the second case of
additive, the form has the drawback that is an additive in all variable, so
that the absence or appearance of any variable (such as nonuse of some
exogenous or use of some endogenous) make output different from zero. This
problem can be checked by testing the function form for specification, if the
test is satisfied the equation can be used for estimating coefficients.
LnQ = LnA + åaiFi + åaiDi + åbiXi +
diIi (4)
The additive equation has
a form of log-lin and can be estimated by the OLS technique. Estimated coefficients
can be used to explain a relative change in dependent variable associated with
an absolute change in independent variables, if other thing constant.
As mentioned in the
thesis, many variables are used and excluded from the model. All of independent
can be divided into four groups: (i) assets of farm, (ii) characteristics of
farm head, (iii) characteristics of farms, and (iv) access to rural and
agricultural infrastructures. Appearance and absence of variables have been
clearly explained in the thesis.
3. Data
As in the previous chapter, the
empirical analysis in this chapter is mainly based on data from the Farm survey
1999. However only 306 out of 3044 observations are used for the quantitative
analysis in the next section. Six observations have been dropped from the
sample due to the following reasons:
Two observations with
incomplete information regarding the characteristics of the farm head were
removed from the sample;
Two observations with
zero value of farm income were automatically replaced by the mean in order to
transform positive value of the monthly and daily income into the natural
logarithm;
Two observations
with the abnormal values of capital were omitted from the sample, so that
parameter estimates in the model are less sensitive to outliners.
Table 1: Variable Definitions
and Summary Statistics, 1998*
|
Variable
|
Mean
|
Std. Dev
|
Definition
|
|
|
Log of income
|
1.22
|
.5513
|
Log of value of family farm income (in million of
dong)
|
|
|
|
|
|
Total labour of farm
|
2.7
|
3.53
|
Number of all family labour
(in person)
|
|
|
Capital
|
292.40
|
428.03
|
Value of physical capital (million of dong)
|
|
|
Time of operation
|
6.85
|
7.45
|
Time from establishment to
surveyed time (in year)
|
|
|
Telephone
|
.15
|
.36
|
Dummy variable, =1 if farm has
a telephone
|
|
|
Land use rights
|
.61
|
.49
|
Dummy variable, =1 if farm was
given land use rights
|
|
|
|
|
|
Age of farm head
|
46.62
|
9.88
|
Age of farm head at surveyed
time (in year)
|
|
|
Sex of farm head
|
.93
|
.26
|
Dummy variable, =1 if farm
head is male
|
|
|
Education levels of farm head
|
|
|
Secondary
|
.50
|
.50
|
Dummy variable, =1 if farm
head has secondary level
|
|
Primary
|
.31
|
.46
|
Dummy variable, =1 if farm has
primary level
|
|
Farm sizes
|
|
|
From 2 to 3
|
.12
|
.41
|
Dummy variable, =1 if farm
holds from 2 to 3 ha
|
|
|
From 3 to 5
|
.41
|
.49
|
Dummy variable, =1 if farm holds
from 3 to 5 ha
|
|
|
From 5 to 10
|
.27
|
.44
|
Dummy variable, =1 if farm
holds from 5 to 10 ha
|
|
|
From 10 to 15
|
.07
|
.26
|
Dummy variable, =1 if farm
holds from 10 to 15 ha
|
|
|
Larger than 15
|
|
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