UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS TECHNICAL EFFICIENCY OF RICE PRODUCTION IN VIET NAM BY LE HOANG VIET PHUONG MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2012 i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS TECHNICAL EFFICIENCY OF RICE PRODUCTION IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By LE HOANG VIET PHUONG Academic Supervisor: DR. PHAM KHANH NAM DR. PHAM LE THONG HO CHI MINH CITY, DECEMBER 2012 ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DECLARATION I declare that “Technical efficiency of rice production in Vietnam” is my own works, it has not been submitted to any degree at other universities. I confirm that I have made by effort and applied all knowledge for finishing this thesis in the best way.
HCMC, December 2012 LE HOANG VIET PHUONG i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENTS When working on this thesis, I had been given much valuable help and encouragement which is a strong motivation for me to go through difficulties and finish the thesis. First of all, I kindly give my sincere thanks to Dr. Pham Khanh Nam and Dr. Pham Le Thong who wholeheartedly helped and guided me through the thesis.
I would like to give my thanks to Associate Prof. Nguyen Trong Hoai – Vice Principal of the University of Economics & Director of Vietnam – Netherlands Programme for MA in Development Economics who facilitated me when I was doing the thesis as well as in the past two year Postgraduate Program. I would like to give my thanks to Dr. Do Thi Loan – Deputy Chairwoman & Secretary General of HCMC Real Estate Association who wholeheartedly guided me to do the thesis and allowed me to have valuable time to finish the thesis.
I would like to extend my thanks to: - Dr. Nguyen Huu Dung for his comments related to my TRD. Hay Sinh, Dr. Nguyen Quynh Hoa, Dr.
Nguyen Ngoc Vinh, Dr. Tran Tien Khai, Dr. Le Van Chon, MA. Truong Quang Hung, MDE.
Phung Thanh Binh and MBA. Hoang Tuyet Thu who always encourage and support me during my study and my doing this thesis; ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Nguyen Khanh Duy and MDE. Nguyen Ngoc Danh for their proposal and guides related to my subject; - Lecturers of Economics Development Faculty, HCMC University of Economics and other lecturers having participated in Vietnam – Netherlands Programme for MA in Development Economics who shared their precious experiences which I could apply to the thesis as well as to my work.
Lastly, I would like to express my heartfelt thanks to my family, my friends and my colleagues in HCMC Real Estate Association who are always by my side. Ho Chi Minh City, December 2012 iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT This study estimates the technical efficiency of the rice farmers in Vietnam from the stochastic frontier production function using Vietnam Access to Resources Household Survey (2008). This study finds that the labour, machine, seed, fertilizer, pesticide and herbicide strongly affect rice productivity. The mean technical efficiency of farmers is 60.
The technical efficiency level of sampled farmers ranges from 17. Number of household members, age of farmer, experience, education, credit access, training program are predictors of technical efficiency. Finally, joining associations or groups which is proxy variable of social capital also strongly affect technical efficiency. However, the result is very interesting and different with my expectation.
In my study, the farmers who join more in Farmers’ Union, Union and other groups will produce less than that in the other farmers. iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS DECLARATION. iv TABLE OF CONTENTS. v LIST OF TABLES.
vii LIST OF FIGURES. viii LIST OF ABBREVIATIONS. ix CHAPTER I INTRODUCTION .4 Scope of study and data. 4 CHAPTER II LITERATURE REVIEW .1 Literature review on economic efficiency .3 Graph explanation for technical efficiency, allocative efficiency and economic efficiency .2 Stochastic frontier analysis framework.1 Stochastic frontier model and technical efficiency measurement .2 Graph explanation for stochastic frontier model and technical efficiency .3 Social capital concepts.
21 CHAPTER III RESEARCH METHODOLOGY. 23 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 Stochastic frontier production model .2 Technical efficiency model. 40 CHAPTER IV ANALYSIS AND RESULTS .1 Descriptive statistics of rice production.2 Descriptive statistic of inputs contribution .3 Descriptive statistic of variables in technical efficiency model .4 Descriptive statistics of credit access.5 Descriptive statistic of social capital .2 Estimations results and discussions .1 Stochastic frontier production model .2 Discussion of stochastic frontier production model .3 Technical efficiency level and discussions .1 Technical efficiency level .2 Discussion of technical efficiency level .4 Technical efficiency model and discussions .1 Correlation matrix of independent variables .2 Technical efficiency model .3 Discussion of technical efficiency model. 58 CHAPTER V CONCLUSION AND POLICY IMPLICATION .3 Limitation and further research.
67 vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 2.1 Summary of empirical review .1 List of Variables in Stochastic Frontier Production Function .2 List of Variables in Technical Efficiency Model .1 Rice production of the farmers in 12 months .2 Descriptive statistics of inputs contribution .3 Descriptive statistics of variables in technical efficiency model .4 Descriptive statistics of credit access .5 Descriptive statistics of joining groups.6 Maximum Likelihood Estimation of Stochastic Frontier Production Function 47 Table 4.7 Frequency distribution of technical efficiency for rice farming .8 Correlation matrix of independent variables .9 OLS and FGLS estimation results of Technical efficiency model .53 vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2.1 Input Oriented Efficiency Measures .2 Technical efficiency of production.3 Stochastic Frontier Production Function .2 OLS, MOLS, COLS and MLE deterministic production frontiers .1 Pie chart shows the structure of sellers .2 Pie chart shows the structure of buyers .3 The distribution of technical efficiency.51 viii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS AE Allocative efficiency COLS Corrected Ordinary Least Squares (COLS) DEA Data Envelopment Analysis EE Economic efficiency FGLS Feasible Generalized Least Squares FO Farmer Organization GSO Government Statistics Office IF Irrigation farmers IPM Integrated Pest Management IPM Integrated Pest Management MLE Maximum Likelihood Estimation (MLE) MOLS Modified Ordinary Least Squares (MOLS) NIF Non-irrigation farmers OLS Ordinary least squares RNF Row-seeder non-practiced farmers RPF Row-seeder practiced farmers SDAFF Statistics Department of Agriculture, Forestry and Fishery SFA Stochastic frontier analysis SFR Stochastic frontier regression TE Technical efficiency VARHS Vietnam Access to Resources Household Survey VFA Vietnam Food Association VHLSS Vietnam Household Living Standard Survey VIF Variance Inflation Factor ix LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER I INTRODUCTION 1.1 Problem statement Agriculture plays an important role in the economy. It supplies food, raw materials for industry, foreign currency through exports, capital for the other economic sectors, and develops the domestic market (Ho, D. According to the Ministry of Agriculture and Rural Development, in 2010, total agricultural output accounts for 44.6 million tons, an increase by 2.9% compared with that in 2009. In 2011, total agricultural output accounts for 46.97 million tons, increased by 5.2% compared with that in 2010.
In the first six months of 2012, total agricultural value accounts for 79,581.25 billion VND, increased 3.01% compares with same period in 2011. Among the agricultural sectors, the rice farming plays the most important role. The rice production accounts for 89.69% of the agricultural output.0 million tons in 2010, increased by 2.74% compared with 2009, achieving 42.3 million tons in 2011, up 5. In the first six months of 2012, it recorded 20.26 million tons, up 2.3% compares with same period in 2011.Generally, rice yields increased; however, the growth rate would decline.
According to Vietnam Food Association (VFA), rice export in 2012 will face a lot of difficulty. In 2011, Vietnam’s rice export recorded 7.11 million tons with the value of 3. And it is forecasted that Vietnam would export from 6.5 to 7 million tons in 2012. According to the Ministry of Agriculture & Rural Development and Ministry of Natural Resources & Environment (2012), over 10 years, agricultural land in Viet Nam was converted to build roads, industrial parks, urban zones, even golf courses, airports, and so forth.
The 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com converted land area reached 300,000 ha and the agricultural land would decrease more over time. In particular, 80% of the reclaimed agricultural land was of high productivity with good infrastructure, good irrigation, two crops per year. This led to a loss of 500,000 tons of rice per year, affecting livelihoods of million farmers. This was an inevitable consequence of the rural industrialization and urbanization process in a hurry in the past.
According to the Ministry of Natural Resources & Environment (2012), in some provinces, the speed of land conversion took place very fast. In the north, 1,400 ha, 1,200 ha and 1,000 ha of agricultural land in Hai Duong, Vinh Phuc, Hung Yen respectively disappeared every year. In the south, the agricultural land in Ca Mau and Bac Lieu decreased by 6,200 ha and 5,400 ha respectively. Even in such provinces with the advantages of rice production and the important role in ensuring food security as Thai Binh, Nam Dinh, Hung Yen, Hai Duong, Can Tho, Ca Mau, An Giang,… the local governments reclaimed the agricultural land for their benefits.
Moreover, the farmers have faced some other disadvantages such as: limited access to formal credit; poor irrigation system; increased input prices; low output prices; migration of the young and educated people; lack of the support of the government. Given such difficulties, can the farmers obtain maximum output in rice production? To answer this question, we should investigate technical efficiency. In recent years, in developing countries, many studies of the technical efficiency have been conducted. However, studies which are related to the technical efficiency in Vietnam are fewer than those in other developing countries.
This study is to measure the technical efficiency by using the stochastic frontier approach and to find out factors affecting the technical efficiency. In this research, I am particularly interested in the impact of social capital on the technical efficiency. From this analysis, some recommendation will be offered to increase the production efficiency. 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Research objectives The research objectives are to: (1) Examine the determinants of rice output and technical efficiency of the farm households in Vietnam.
(2) Examine the level of technical efficiency of the rice production. (3) Suggest some policy recommendation to increase the farm households’ technical efficiency.3 Research questions The study is to answer the following questions: (i) What are the factors affecting the rice output? (ii) What is the technical efficiency level that the farmers obtain? (iii) What are the determinants of the technical efficiency? Especially, I want to focus more on the effect of the social capital on technical efficiency. Therefore, an additional question is raised, that is: "Does the social capital affect the technical efficiency?" 1.4 Scope of study and data This research applies the stochastic frontier regression (SFR) to examine the determinants of rice output and find the technical efficiency level of the farmers; and ordinary least square regression (OLS) to examine the factors affecting the technical efficiency. The data comes from the Vietnam Access to Resources Household Survey (VARHS) in 2008.
This survey was conducted by the Institute for Labor Studies and Social Affairs (Vietnam).