Studies in Regional Science
Online ISSN : 1880-6465
Print ISSN : 0287-6256
ISSN-L : 0287-6256
Case Studies
Cost-benefit Analysis of Agricultural Public Investment Supported by the Japanese Technical Cooperation
—Case Study of an On-farm Facility Consolidation Project in Thailand—
Yoji KUNIMITSU
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2005 Volume 35 Issue 2 Pages 475-485

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Abstract

An on-farm facility consolidation (OFC) project, involving construction of irrigation ditches, drainage ditches and farm roads, was conducted as a public investment in a typical rice producing area on the Chao Phraya Delta by the Thai Government with the support of Japanese technical cooperation. Due to increased public awareness of government activities, demonstrating the effectiveness of public investment is considered extremely important in securing transparency and accountability in both countries. The purpose of this study was to apply a cost-benefit analysis to the OFC project. Empirical results showed that the total benefit was higher than total costs, even under a high social discount rate of 12% for two alternative plans, employing a conventional trapezoidal-shaped concrete lining ditch (trapezoidal ditch) and a U-shaped reinforced-concrete flume ditch (U-shaped ditch). The land-productivity effect accounted for most of the project benefits and shows that, in Thailand, an improvement of farmers' income is more critical than labor-cost savings. The renewal effect also needs to be considered, as this effect was the next highest to the land productivity effect. The trapezoidal ditch, with low initial costs in spite of high running costs and short durability in years, was superior to the U-shaped ditch with the opposite characteristics at a high social discount rate. However, a decrease in the social discount rate to less than 4% would make the U-shaped ditch superior to the trapezoidal one.
JEL classification : H41, H43, H54, O22, O53, Q15

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© 2005 by The Japan Section of the Regional Science Association International
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