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Infusing Growth: Rural Agricultural Investments and its Impact on Agrarian Development in Northeast Thailand

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Priyanka Parvathi, Rattiya Suddeephong Lippe, and Hermann Waibel, Institute of Development and Agricultural Economics, Gottfried Wilhelm Leibniz Universität Hannover
Presented at the ReSAKSS-Asia conference “Agriculture and Rural Transformation in Asia: Past Experiences and Future Opportunities”. An international conference jointly organized by ReSAKSS-Asia, IFPRI, TDRI, and TVSEP project of Leibniz Universit Hannover with support from USAID and Deutsche Forschungsgemeinschaft (DFG) at the Dusit Thani Hotel, Bangkok, Thailand December 12–14, 2017.

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Infusing Growth: Rural Agricultural Investments and its Impact on Agrarian Development in Northeast Thailand

  1. 1. Infusing Growth: Rural Agricultural Investments and its Impact on Agrarian Development in Northeast Thailand Priyanka Parvathi, Rattiya Suddeephong Lippe and Hermann Waibel Institute of Development and Agricultural Economics, Gottfried Wilhelm Leibniz Universität Hannover ReSAKSS-Asia Conference, Bangkok December 12-13, 2017
  2. 2. Motivation BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [2] Generally studies on structural changes in agriculture use country level macro data of many years (Alvarez-Cuadrado & Poschke,2011; Ngai and Pissarides,2007; Nunn & Qian; 2009; Gollin et al., 2005; Hansin & Prescott, 2002; Michaels et al., 2012) But is it possible to understand patterns of agricultural transformation among smallholder farmers at the household level ?
  3. 3. Research Objectives 1. To model agricultural transformation of smallholder farmers using panel household data 2. To examine whether investing in smallholder agriculture structurally changes employment patterns of rural HHs BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [3]
  4. 4. Structural Change Measures Labour Share in Agriculture: No of members occupied in agriculture / Total available HH labour (McArthur and McCord, 2017) Labour Share in Off-farm: No of members occupied in non-agriculture / Total available HH labour (McArthur and McCord, 2017) Mechanization: Total variable machine costs incurred per hectare Farm Size: Rice area in hectares BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [4]
  5. 5. Study Area and Data BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [5] • 3 Provinces: Buri Ram, Nakhom Phanon & Ubon Ratchathani • 5 year Panel data from approximately 2000 HHs : 2007, 2008, 2010, 2013 & 2016 • Total pooled sample 10, 364 HHs • Rice Farmers : 7974 HHs
  6. 6. Changes in Investment Patterns BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [6] HH investment in agriculture continues to decline 66% 54% 57% 52% 47% 34% 46% 43% 48% 53% 0% 20% 40% 60% 80% 100% 120% 2007 2008 2010 2013 2016 farm Other
  7. 7. Factors Affecting HH Agricultural Investment • Younger farmers with a larger farm size tend to invest more in agriculture • Demographic shocks such as death of a main family member are likely to reduce HH investment in agriculture • Livestock farmers are more likely to invest • If rural HHs have off-farm income, investment in farm tends to decline • Memberships in socio-political organizations are more likely to increase agricultural investment • HH Assets are more likely to play a critical role in agricultural investment BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [7]
  8. 8. Relationship between Agricultural Investment & Rice Yields BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [8] 1600 1700 1800 1900 2000 2100 2200 0 200 400 600 800 1000 1200 1400 2007 2008 2010 2013 2016 RiceYields Investment(inPPPUSD) Year investments /ha rice yield The more agricultural investment in the previous year, the higher crop yields in the next year
  9. 9. Other Factors affecting Yields • Rural farmers investing at least 3 times in the last 10 years are more likely to witness yield increases in the current year. • Farm size and yields have an inverse relationship • Weather and Agricultural shocks like drought, floods, livestock diseases, crop pests and irrigation problems decreases yields • Economic shock like job-loss, business-failure, debt-burden makes rural HH to shift farming from secondary to primary livelihood option • Using fertilisers and mechanization improves yields • Climate in term of adequate rainfall also affects rice yields BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [9]
  10. 10. Structural Change: Investment & Labour Shares BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [10] • Labor Share in Agriculture has reduced from 67% in 2007 to 57% in 2016 • Off-farm Labor share has increased from 33% in 2007 to 43% in 2016 • It takes a minimum of 2 years for investments to impact rural labor shares in agriculture and off-farm activities 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0 200 400 600 800 1000 1200 1400 2007 2008 2010 2013 2016 LaborShare Investments(inPPPUSD) Year investments /ha Agri Labour share Off-farm labor share
  11. 11. Structural Change: Yields, Mechanization & Farm Size BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [11] The more is the yield increase in the previous year, the larger is the mechanization in the next year The more is the yield increase in the previous year, the larger is the farm size in the next year 0 100 200 300 1600 1800 2000 2200 2007 2008 2010 2013 2016 machineexpenses /ha(inPPPUSD) Yields Year Yields machine Expenses 0 0.5 1 1.5 1600 1800 2000 2200 2007 2008 2010 2013 2016 Farmsize(inha) Yields Axis Title Yields Farm Size
  12. 12. Conclusion • Younger farmers with a larger farm size including livestock and having memberships in socio-political organization invest more in agriculture • Climate change in terms of adequate rainfall also plays a role in agrarian investments • Smallholder households must at least invest thrice between 2007- 2016 to witness a rice yield increase in 2016. • Investing in agriculture increases yield and with time structurally changes agriculture and leads to development BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [12]
  13. 13. Policy Implications BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [13] • Mechanisms to cope with shocks like insurance facilities must be made affordable to rural households so that investments in agriculture remain unaffected • Rural agricultural loans for investment in farm machinery need to be made more accessible • Agricultural climate friendly inputs need to be made affordable to increase yields and result in structural change. • Area under irrigation need to be increased • Thailand agricultural environment needs to be made more investment friendly
  14. 14. Thank you for your Attention ! [14]

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