ESTIMATION OF ECONOMIES OF SCALE IN RICE PRODUCTION

Abstract

In Japanese rice production the technological system of middle size machinery was established in the early 1970's. This technological system is the mechanization of the whole rice production process from ploughing to harvesting. One of the characteristics of this technological system is indivisibility, which is quite different from the characteristics of traditional rice production technology. This new characteristic of rice production technology suggests the existence of economies of scale.
The purpose of this paper is to estimate economies of scale in rice production. The translog cost function is estimated using the cross-sectional data for the period 1973-75. It was found that there were significant scale economies for farmers producing rice from 0.5ha to 2.0ha. There were, however, small unexploited economies of scale for farmers producing rice with more than 2.0ha. The production cost of 1kg of rice of farmers in the class of 0.5-1.0ha was about 28% higher than the production cost of the farmers who produce rice with more than 3.0ha. The difference in production costs between farms of various sizes was mainly due to the difference in capacity and type of the agricultural machinery used in rice production. Farmers producing on more than 3.0ha of rice employ efficiently the middle size machinery system, while farmers cultivating less than 2.0ha employ machinery of smaller capacity and/or only part of the machinery system.