Cost–Benefit Analysis of Soil Degradation and Restoration - Principles of Sustainable Soil Management in Agroecosystems - page 236

The methodology used is based on the concept of a metaproduction function
hypothesized by Hayami and Ruttan (1985). Following Lau and Yotopoulos (1987),
this metaproduction function can be written as

Y t = f ( X it , …, X mt , t ) (10.1)

where Y t is the quantity of output, X it is the quantity of the i ith input, i = 1,…, m , and t
is time. This production function can be used to represent the input-output relation-
ship of agriculture or food production. As defined by Lau and Yotopoulos (1987),
the embedded hypothesis for this metaproduction function is that all producers (or
countries) have potential access to the same set of technology options, but each may
choose a particular one, depending upon its natural endowment and relative prices of
inputs. In the Zhao (1988) research, a metaproduction function similar to Equation
10.1 was estimated. However, since his focus was not on the estimation of productiv-
ity changes, the time variable t was replaced by two variables, soil and land degrada-
tion and price distortion. These two variables were hypothesized to have impacts on
technology choices among different countries during the study period.
This study was concerned with estimating the relative changes in output rather
than the absolute levels of output. Thus, the dependent variables are expressed in
relative terms as a percent change or average level of output during the study period.
Following Hayami and Ruttan (1971), the inputs may be categorized as follows:
(1) internal resource accumulation, including an expansion of the arable and per-
manent cropland, and the growth of labor force, and (2) technical inputs supplied by
the nonagricultural sector. Two industrial inputs, fertilizer and machinery, represent
proxies for the whole range of inputs that include modern, biological, and mechani-
cal technologies.
It is widely recognized that government policies may greatly affect agricultural
production growth in developing countries (IIED and World Resource Institute
1986; Argawala 1983; Krishna 1982). Most of these studies conclude that many of
the economic policies pursued in developing countries have limited the growth of
agricultural production and hampered efforts to reduce rural poverty.
Although price is not a complete measure of incentives in agricultural produc-
tion, it is one of the most important policy devices. Agricultural price policy has
been actively used by virtually all governments to pursue a wide variety of resource
allocation, government revenue generation, and income distribution objectives. The
fact that most developing countries discriminate against agriculture is reflected in
price distortions.
The agricultural or food production growth function can be established by esti-
mating the coefficients between agricultural/food production growth and the changes
in the relevant independent variables. The growth of total agricultural production
(TAP) or total food production (TFP) is affected by changes in the same factors.
Based upon discussions above, the aggregate agricultural or food production growth
function can be expressed in the following form:

Y g = f ( A g , L g , Q , F g , M g , G ) (10.2)