Determinants of water melon production at farm household level in tien giang provice

INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

VIETNAM- NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF WATER MELON
PRODUCTION AT FARM HOUSEHOLD LEVEL
IN TIEN GIANG PROVINCE
A thesis submitted in partial fulfilment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

LUONG THI MY DUYEN

Academic Supervisor:

DR. TRAN TIEN KHAI
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ACKNOWLEDGEMENTS
I would like to express my deep thankfulness to board of professors, doctors, teachers

and staffs of Vietnam - Netherlands Programme for Master of Arts in Development
Economics for all their instruction, help and support during my study here.

Firstly, I would like to express my special thankfulness to my supervisor Dr. Tran
Tien Khai who devoted to his students by all his enthusiasm, advice, encouragement
and guidance. I could not finish my thesis without his support. I also want to thank to
Professor Nguyen Trong Hoai who always follow closely and listen each
expectation of all the students to guideline and support during this study programme. I
also would like to give my attitude of admiration to Dr. Peter Calkin about his
ability to read thesis research design (TRD), to give comments on TRD for all
students, and especially his ability to work tirelessly through discussion directly with
each student to give them his advice. And I applied your valuable advice into my
research.

I am also thankful for the helping from Mr. Tran Ngoc An- Director of Agricultural
Seed Center of Tien Giang Province who introduced me to Tien Giang's Rural and
Agriculture Development Department, Tien Giang's Plant Protection Department,
Agri-extension station of each district, and Plant Protection station of each district;
gave me good information on farm household survey questionnaires; and advised me
how to collect sufficient data. I give my thanks for enthusiastically helping to persons
in charge of at each district (Go Cong Tay, Go Cong Dong, Cai Be, Cai Lay, Chau
Thanh, Cho Gao, Tan Phuoc). Especially, my research could not implement without
the co-operation, support and ready to answer my questionnaires of farmers or their
farm household. Thank you very much to 177 farmers who have been planting water
melon around the Tien Giang province.


Finally, this research would not have been finished without the patience, motivation
from my parents who now is living in Go Cong Tay. Their support is throughout
surveys to collect data. I always appreciate high for your helping.

Thank you very much all of you!


CERTIFICATION

I certify that the substance of this thesis has not already been submitted for any degree
and I not being current submitted for any other degree.

I certify that to the best of my knowledge any help received in preparing this thesis,
and all source used, have been acknowledged in this thesis.

Luong Thi My Duyen


ABSTRACT

Tien Giang belongs to basin of Vietnam Mekong River Delta which has good weather
and soil conditions for agriculture, forestry and aquaculture. Beside of rice as a main
crop, Tien Giang has been carrying out the converting agricultural structure program,
growing diverse crops like fruits, vegetables, and short-term industrial plants etc.
Especially, in recent years, farmers have a chance to get good income from water
melon crops because a water melon crop is only two-month which could give high
yield and good quality. It not only is consumed in Vietnamese markets, but also
exported to Chinese market and Cambodian markets by bordering. However, Tien
Giang's water melon has not developed to a sustainable level yet because farmers'
cultivation still brings spontaneous nature, lacks concentration and specialization.
Moreover, there have not yet had any clear information about economic efficiency of
this fruit which is provided for provincial authorities.

That is one of reasons which the author implemented this research to evaluate the
productive resources utilization for water melon production and the economic
efficiency from 2010's summer-fall crop. Production function under log-log and
Cobb-Douglas forms and SWOT analysis are applied. In this research, the author used
the primary data through direct interview of 177 respondents at 7 districts across Tien
Giang province.

The study results showed that soil has not affected much to water melon yielding yet
now. However soil will be the most important constraint factor to water melon yield
because pest damage can be more seriously if water melon is cultivated continuously
at the same location. And water melon is a special vegetable need to be taken care
carefully; so, farmers should consider the production area which is suitable with their
ability to plant and to gain the highest yield. Investment more in fertilizer had less
effect to water melon yielding change; however, we should fertilize more phosphate
fertilizer P20 5 during land preparation period for acid sulphate soil. Labor is also


considered as a determining factor, in which growing years of producers play the
most important role in yielding change. In addition to, farmers have not cared to
market information, agricultural extension services in locations, etc yet. In general,
although farmers lack support of many organizations, water melon yielding which
farmers gained is relatively high because of utilization of productive resources well.


TABLE OF CONTENTS
Page
A CKN 0 WLEDGEMENTS ............................................................................................ .
CERTIFICATION .......................................................................................................... .
ABSTRACT ..................................................................................................................... .
CHAPTER 1: PROBLEM STATEMENT .................................................................. !

1.1 Research context .......................................................................................... 1
1.2 Research problem ........................................................................................ 1
1.3 Goal and specific objectives of the study .................................................... 2
1.4 Research question ........................................................................................ 2
1.5 Scope ofresearch ......................................................................................... 3
1.6 The organization of the thesis ...................................................................... 3
CHAPTER 2: LITERATURE REVIEW ..................................................................... 5

2.1 Theoretical framework ................................................................................ 5
2.1.1 Theory of farm household economies ......................................................... 5
2.1.2 Production function ........................................................................................ 8
2.1.3 Production factors of farm household ....................................................... 11
2.2 Empirical studies ....................................................................................... 12
2.3 Analytic framework of this research ......................................................... 17

CHAPTER 3: RESEARCH METHODOLOGY ...................................................... 19
3.1 Analytical framework ................................................................................ 19
3.1.1 Model specification ...................................................................................... 19
3.1.2 Variables indication ...................................................................................... 20
3.1.3 Sign expectation ............................................................................................ 20
3.1.4 Variables description .................................................................................... 21
3.2 Data collection and sample distribution .................................................... 24
3.2.1 Sample size .................................................................................................... 24
3.2.2 Sample distribution ....................................................................................... 25
3.2.3 Sampling framework .................................................................................... 26


3 .2.4 Pre-testing of the questionnaires ................................................................ 26
3.2.5 Orientation to collect data ........................................................................... 26

3.2.6 Limitation of data source and collection ................................................... 27
3.3 Analysis methods ....................................................................................... 27
3 .3 .1 Analysis methods .......................................................................................... 27
3.3 .2 Usefulness of the research.: ......................................................................... 28

CHAPTER 4: ANALYSES OF WATER MELON PRODUCTION IN TIEN
GIANG PROVINCE AND INFLUENCES OF INPUT USES ON WATER
MELON YIELD ........................................................................................................... 29

4.1 Introduction ofTien Giang province and its water melon production ...... 29
4.1.1 Overview ofTien Giang province ............................................................. 29
4.1.2 Climate condition .......................................................................................... 30
4.1.3 Soil condition................................................................................................. 30
4.1.4 Water melon production in Tien Giang ..................................................... 32
4.1.5 Market and product competitiveness ......................................................... 33
4.2 Analyses of water melon production in Tien Giang province ................... 36
4.2.1 SWOT analysis .............................................................................................. 36
4.2.2 Description of water melon production in Tien Giang through farm
survey ........................................................................................................................ 37
4.2.3 Analyses the influences of input uses to water melon yield by
econometrics analyses ............................................................................................ 55

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS ..............•............. 63
5.1 Conclusions ................................................................................................ 63
5.2 Recommendations ..................................................................................... 65
CHAPTER 6: LIMITATION ..................................................................................... 68
REFERENCES ............................................................................................................. 69
APPENDIX 1 ................................................................................................................ 71

APPENDIX 2: ............................................................................................................... 76

CHAPTER 1: PROBLEM STATEMENT
1.1 Research context

Tien Giang's water melon is one of the fruit trade-mark which is exported to China
and Cambodia through border trade. However, water melon production has not been
really stable yet at present. In 2007, the total water melon productive area of Tien
Giang is 3,779 hectares, and output is 70,847 tons. In 2008, the total water melon
productive area is only 2,954 hectares, and output is also only 55,754 tons (Tien
Giang's Rural and Agriculture Development Department). The water melon
cultivation in Tien Giang currently brings spontaneous nature, lacks concentration,
lacks specialization, lacks market information, strongly price fluctuation, and
market demanded quantity depends much on wholesalers or distributors even also
changes according to season. At the producer's perspective, there is not currently
available information on economic efficiency and ability to contribute profits from
water melon planting into the income structure of farm households. Although there
are many unknown information related to water melon cultivation and trading, but
the author only is interested in the supply side, especially the economic efficiency
of planting water melon in Tien Giang province.

This research also assumes that the following weaknesses need to be strengthened
in water melon production process a) low entrepreneurial ability of farmers of both
genders and all ages; b) ability to confront bad natural conditions of farmers such as
suddenly and usually climate change; c) water melon quality for market.

1.2 Research problem
It is not yet known what factors lead farmers to gain the highest water melon output.

Farmers of various types will react differently to each different factor. This study is

required to find out the potential factors impact to Tien Giang's water melon
production based on production function model, theory of farm household
economics and SWOT analysis.

Page 1


This study focused on evaluating the effectiveness of using inputs for water melon
production, including resources in term of land, labor, capital (capital includes cash
capital and physical capital such as fertilizer, seeds, etc). In addition to, market
information also need to be considered to provide enough to certain markets, not
surplus or deficit.

1.3 Goal and specific objectives of the study
Tien Giang is one of provinces in the core economic region in Western Vietnam.
However, agriculture still plays a crucial role in economic development. The overall
goal of the study is to advance the efficiency of agricultural production and improve
the lives of farm households in Tien Giang province through water melon output.

The specific objectives of the study are to:
1. Identify the potential factors which impact strongly to water melon
production process in order to indicate the right ways and approaches to gain
higher productivity.
2. Estimate economic efficiency of different factors of production used in water
melon cultivation.
3. Make recommendations and strategic suggestions for government policy and
farmer groups to enhance the profitability of water melon production to
farmers

1.4 Research question

The above research objectives mentioned the most important purpose of this
research is to identify the potential factors impact to water melon production and
estimate economic efficiency of those factors of production in water melon
cultivation. Therefore, the author gives research question to address the objective
such as:

Page 2


Which factors that impact potentially on Tien Giang's water melon production?
How is economic efficiency of factors that impact to water melon production
estimated?

1.5 Scope of research
This research can not cover all factors impact to water melon production because of
still other factors lie behind the above factors and weaknesses. It only studies some
factors like inputs (productive area, labor, fertilizer, seed, etc), market information
and growing years of farmers. Tien Giang has 8 districts (Go Cong Tay, Go Cong
Dong, Cai Be, Cai Lay, Chau Thanh, Tan Phu Dong, Tan Phuoc, Cho Gao), 1 city
(My Tho City) and 1 town (Go Cong Town). Through 177 questionnaires is
interviewed directly from farmers, who planted water melon at least 1 year, across
Tien Giang province within 3 months (from October to December 2010), this study
will have enough data and information to analyze.

1.6 The organization of the thesis
Chapter 1 presents the rationale of this research including the research context,
research problem, goal & specific objectives of the study, research questions, scope
of research and the organization of the thesis.
Chapter 2 is literature review. This chapter provides: (1) theory about farm
household economies, production function and production factors of farm

household; (2) empirical studies; and (3) analytic framework of this research.
Chapter 3 introduces research methodology including analytical framework (the
regression model, variable indication, sign expectation, variable description), data
collection and sample distribution and analysis methods.
Chapter 4 presents the analyses of water melon production in Tien Giang province
and influences of input uses on water melon yield. In this chapter, the author
describes the overall picture of Tien Giang province in terms of overview of Tien

Page 3


Giang province, climate condition, soil condition, water melon production in Tien
Giang, and market and product competitiveness. In addition to, the author also
presents the analyses of water melon production in Tien Giang province (SWOT
analysis, description of water melon production in Tien Giang through farm survey,
analyses the influences of input uses to water melon yield by econometrics
analyses)
Chapter 5

IS

the last one is presented conclusion and recommendation for

provincial authorities to help farmers get a higher productivity and especially get a
higher benefit.

Page4


CHAPTER 2: LITERATURE REVIEW

2.1 Theoretical framework
2.1.1 Theory of farm household economies

Logical deductions from a set of prior assumptions about household goals, and
about market nature in which households make their decisions explain peasant
economic behavior. The farm household is taken as a single decision-making unit
for purposes of economic analysis; the household maximizes a single utility
function, then profit maximization and utility maximization coincide; all input and
output markets are fully formed and competitive then profit maximization is always
a component of utility maximization, even though there may be several other
variables in the utility function; differences in the logic and predictions of different
theories arise from different assumptions about the working of factor and product
markets rather than from different assumptions about household goals; varying
assumptions about labor markets and the allocation of household labor time are
often the critical feature which distinguishes one theory from another; and
household economic behavior depends on social relations which make markets
work in certain ways for some peasants and in different ways for other peasants
(Frank Ellis, 1993).

2.1.1.1 Farm household

Labor force in agriculture is mainly the performance of farmers. So in agriculture,
the notion of firm is determined easily because agricultural farm is usually related to
farm household. And every household has farm of different sizes. On average farms
are very small in parts of sub-Saharan Africa and South and East Asia; see, for
instance Bangladesh, China, Democratic Republic of the Congo, Egypt, Indonesia,
India, and Korea. In these countries almost of farms are under two hectares. In other
hand, the holding is mostly thousand hectares in West European countries. Farms
have also many different types such as family farms or business farms or farm

enterprises. The specialized farm enterprises wholly linked to the market economy.

Page 5


Therefore there are still difficulties in making distinctions between farms in term of
size of farm resources and nature of production (Boussard 1987) (cited in Tran Tien
Khai, 2001 ).

Peasants are farm households. They access to a piece of land, utilize mainly family
labor in farm production. They are located in a larger dominant economic and
political system that could affect their production behavior, but fundamentally they
are characterized by partial engagement in input and output markets, which are
often imperfect or incomplete (Ellis 1992, 9-1 0) (cited in Mariapia Mendola, 2007).
Peasant farm households account for no less than a quarter of the world's
population. According to Bardhan and Udry 1999, most are in developing countries
where they can represent up to 70 percent of the national population (cited in
Mariapia Mendola, 2007). According to Ellis's point of view, peasants also occupy
a large proportion of humankind living in developing countries.

Hunt (1991) identifies peasant farms as both production and consumption units: a
proportion of produce is sold to meet their cash requirements and financial
obligations, and a part is consumed by them (cited in Mariapia Mendola, 2007).

2.1.1.2 Farm's decision-making

This is one of main theories of farm economics. Farmers make decision base on
their maximization of utility. The neo-classical economics supposes that in
conditions are limited resources in production factors and technical availability of
production, farm has behavior of maximization of utility function. According to

Ellis 1993, utility maximization is full income maximization. Brossier et al ( 1997)
expressed the problem of identifying profit maximization in agriculture by the
following formula: (cited in Tran Tien Khai, 2001 ).

II=P-CV -CF-KA- WA

Page 6


Where: II is the profit
KA and WA are remuneration of capital and family labor
P is output value

CV is all variable charges of exterior-bought factors
CF is fixed charges paid to interior.

It is difficult to identify the KA and W A; so, farmers maximized the function II +

KA + WA (or P - CV - CF) which is considered as the agricultural revenue or
revenue.

2.1.1.3 Economy of scale
Economy of scale is a conception come from the neo-classical theory of production.
It refers to cost advantages that a firm obtains because of expansion. There are

many factors that cause average unit cost of producer fall as the volume of output is
increased. The notion of economy of scale concluded that it is very difficult for
small farms to exist due to higher unit cost, less competitiveness in comparison to
large farms.

•

LRAC

'
I

0

Q

Figure 2.1: The relationship between output and average cost
Source: />
Page7


As quantity of production increases from Q to Q2, the average cost of each unit
decreases from C to C 1•

Ellis, 1993 argued that indivisible resources play an important role for economy of
scale in agriculture. For example, power of a tractor is considered as indivisible
resource and its utilization is on land area to be efficient. So, indivisible resources
result in cost economies related to their optimum level of use. The cost economies
associated with indivisible resources have a direct impact on the volume of outputthe scale - that minimizes unit production costs in the short run. (cited in Tran Tien
Khai, 2001).

2.1.2 Production function
Production functions have been used as a fundamental tool to analyze economy in
the neo-classical tradition. A production function is a function that specifies the
output of a firm, an industry, or an entire economy for all combinations of inputs.

Firms tum inputs into outputs (or products or productivity) in their production
process. Inputs are called are production factors include anything that firm used in
production process. For example, in a bakery, inputs include labor force (labor from
workers); raw materials, such as flour and sugar; and the capital invested to buy
ovens, mixers, and other requirements needed to produce outputs like bread, cakes,
and pastries.
•

I

We can divide inputs into the broad categories of labor, materials, and capital.
Labor inputs include skilled worked (carpenters, engineers) and unskilled workers
(agricultural workers), as well as the entrepreneurial efforts of the firm's managers.
Materials include steel, plastics, electricity, water, and any other goods that the firm
buys and transforms into final products. Capital includes lands, buildings,
machinery and other equipment, as well as inventories.

Page 8


The following production function describes the relationship between input and
output. A production function indicates that a firm can obtain the highest output Q
from every specified combination of inputs:

It relates the quantity of output (Q) to the quantities of the inputs such as capital

(X 1), labor (X2), materials (X3) and etc. (Robert and Daniel, 2009)

And a quadratic production function is shown in the following figure. All points
below are technically feasible, and all points on the function show the maximum

quantity of output obtains at the specified levels of inputs.

According the following figure 2.2, from points A, B, and C, the production
function is rising. It means that the additional units of inputs is used, the quantity of
outputs also increases. At point C, the additional units of inputs is used, the
additional output does not produced, in fact, total output begins to decline because
the inputs is under utilized.

At point A, as additional inputs are used, output increases at an increasing rate, and
both marginal physical product (MPP) and average physical product (APP) is also
increasing. The inflection of point A is point X. Diminishing marginal returns starts
at point X because from point A to C, the output increases at a decreasing rate as
additional inputs are used. Point B is tangent between APP and MPP. At this point

B, APP is at a maximum and the marginal curve must be below the average curve.

Page 9


__...,.,....,.... ...,.._....

.c:a.-~..e•t-·y

p.MJ>W

.a.c. d

Clll'1f

c;r;lfl'

t• ...,.._

-.. ._.,..........____.,__ _

......,;iiflllip..-~---·~-::,.-.:::;,

......

............ ___....-.c. ...

-·-

-·•

~

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tt....,. . .

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Figure 2.2: Quadratic Production Function
Source: function

Moreover, the Cobb-Douglas functional form of production function is used widely
to represent the relationship of an output to inputs. It was proposed by Knut
Wicksell (1851-1926), and tested against statistical evidence by Charles Cobb and
Paul Douglas in 1900-1928
For production, the simplest formula of Cobb-Douglas function 1s (Haughton,

1986)
(1)

Where: Q is total production, His productive area, Lis labor input
a., 1- a. are the output elasticity of labor and productive area, respectively.
The general productive function is given as follow
Q=AIIXt

(2)

xi is input variables
Formula (2) is transferred into logarit function as follow

In Q = In A + Ia.i In Xi

(3)

One trouble with formula (3) because it does not allow any Xi equals 0 (ln(O) is
undefined).
So, solution is the productive function is changed as follow
In Q =In A+ Ia.iln Xi+ I ~izi
Zi are the dummy variables to reflect other influences to total production.

Page 10


2.1.3 Production factors of farm household

CAPITAL

m!
Figure 2.3: The three main factors of production of farm household
Land, labor and capital are referred to as "factors of production". Each factor is
plays a unique role in the production of goods.

2.1.3.1 Land

According to Ellis ( 1993 ), land is part of the social status of the family within
village or community. Land has traditional regulations such as land ownership right,
inheritance right, immigrant policy, agrarian policy, and formation of land market.
For instance, land ownership help farmers get finance easier from bank or financial
funds due to its collateral security. Addition to, according to Tracy 1993, Price and
Palis 1997, most farmers prefer to own the greater part of land because land is the
most valuable thing they can bequeath from this generation to other generations
(cited in Iran Tien Khai, 2001). From now, land still is the most valuable resource
which every people cares best.

.2.1.3.2 Capital

Agricultural capital is production cost includes resources in agriculture and nonagriculture. It can refer to assets such as buildings, machinery, equipment,
fertilizers, feeds, and inventory (unsold products), etc. According to Mundlak,
Larson and Butzer ( 1997), there are two kinds of capital: fixed capital and capital of

Page 11


- -

. -

-- - - - - - - - - - - - - - - - - - - - - - -

agricultural origin - livestock and orchards. Fixed cost not only differs from capital
of agricultural origin in the method of construction, but also fundamentally in terms
of market and pricing. Capital of agricultural origin is produced largely by resources
in agriculture and therefore its cost of production is largely independent of the
markets for nonagricultural inputs which are often imperfect. As such, farmers may
face noncompetitive prices for their fixed investment inputs. Also, fixed investment
depends on outside finance. On other way, capital includes cash capital and physical
capital such as fertilizer, seed, etc.

Capital is considered to be a scarce resource for farmers in rural of developing
countries because of low development of formal credit system and lack of
govenunentsupport.

2.1.3.3 Labor

Labor means that human effort used in production, is the population work in
agriculture (hired labor and household labor). Agricultural labor force in rural of
developing countries are plentiful, their free-time is so much.

2.2 Empirical studies

Tran Tien Khai (200 1) used data of the Project Competitivite de la filiere rizicole
dans la region du Mekong, Vietnam including information of rice production from
150 rice farms in four agro-ecological regions during period 1995-1998. Log-linear
and Cobb-Douglas models of production and supply function are applied.
The production function with log-log is followed:
Ln Q = Ln A+ IaiLnXi + L~iDi
and the production function with log-linear is followed:

Ln Q =A+ Iaixi + L~iDi
where Q is rice productivity of farm household in year, A is angular coefficient, Xi
is input variables such as land, labor, investment cost of farm household in year and

Page 12


Di is dummy variables which be able to influent to yielding in terms of farm size,
agricultural ecology, etc.

To estimate the elasticity of rice supply with rice price and agricultural material
price, a simple rice supply function is designed as follow:
Ln Q = Ln A + ~)xiLnXi + L~iDi
where Q is rice productivity of farm household in year, A is angular coefficient, Xi
is variables which influent to rice supply ability of farm household such as land,
labor price, fertilizer price, rice price, and Di is dummy variables which be able to
influent to yielding in terms of farm size, agricultural ecology, etc.

He concluded that rice land stock and water availability were still most important
constraint factors to increase paddy output. Investment more in fertilizers only
generated small marginal return, except the case of potash. And investment more
capital also had less effect to change the paddy output in present cultivation level.

Similar to Iran Tien Khai's research, Nguyen Thi Lien, Nguyen Xuan Hai, Pham
Hoai Vu, and Trinh Thi Long Huong in "Rice Production" (Dominique Haughton,
Jonathan Haughton, Sarah Bales, Truong Thi Kim Chuyen, Nguyen Nguyet Nga,
Hoang Van Kinh, 1999) also used the productive function Ln Q = Ln A + Ia.iLnXi

+ L~iDi to analyze factors which effect to rice productivity.
Purano Baneshwor, Kathmandu (2002) used the Cobb-Douglas production function

of the following type is estimated:

Y = e'6 Ka Lo-a) U
where Y

=

real GDP, ()

=

constant term (shift factor), L

=

labor force, K

=

capital, U = random error term, and () and a. are the parameters to be estimated.

Page 13

real


This equation assumes constant returns to scale as most empirical growth
accounting studies have undertaken. A logarithmic transformation of the above
equation would be:
logY= 8 +a log K + (1- a) log L + U

This paper concluded that the maJor source of growth is basically the capital
accumulation process in Nepal's context. The major factor contributes to economic
growth in developing as well as in developed economies bases on factor
productivity. And intangible factors such as advances in education and technology,
economic policy environment, "learning" and etc have also contributed to higher
factor productivity.

However, in the Nepalese context, the contribution of factors of production such as
labor and capital can not be estimated clearly because information on these
variables is not also clear and the economic growth not accounted for by labor and
capital can not be generalized for factor productivity gain. The factor productivity
will emerge as a negative contributor to economic growth if the true accounting
norm is applied to Nepalese context.

Jacklin (2008) in "estimates the production, restricted cost, and restricted profit
functions using North Dakota agriculture sector data from 1960-2004" also used the
Cobb-Douglas function to represent the production function characterized as:
Ji.

y,

= f (x;,., I a)

or y,

= A 2: (x:~ }
k=l

Where k

1 .... K (number of inputs and time 1... T). Converting the inputs and

=

output into logarithms and adding a stochastic error term, the production function
can be represented as:
A'

In

y, .,.,. a 0

+

L aJt In x,_

=a - a lnx,
(}

~

.....~

1

- ..... +a .. inx .n.,....
.. ,+c,'
A.

Page 14


where

a 1, ... , ak

are the input elasticity, and E denotes the error term.

Jacklin's thesis estimates the Cobb-Douglas production function by the means of a
quantile regression approach. An ordinary least squares regression (OLS) is based
on the mean of the distribution of the regression's variable. And results were
parameters of the production function obtained from estimation both traditional
OLS and quantile regression are not significant statistically between the agricultural
inputs and aggregate output for the period 1960-2004 using aggregate state level
data for North Dakota agriculture.

The Ricardian method (Mendelsohn et al., 1994) is also a cross-sectional approach
to studying agricultural production. The Ricardian approach assumes that each
farmer wishes to maximize income, subject to the exogenous conditions of his or
her farm. Farmland net revenues (V) reflect net productivity. This principle is
captured in the following equation:
(4)

where Pi is the market price of crop i, Qi is the output of crop i, X is a vector of
purchased inputs (other than land), F is a vector of climate variables, H is water
flow, Z is a vector of soil variables, G is a vector of economic variables such as
market access and Px is a vector of input prices (see Mendelsohn et al., 1994). The
farmer is assumed to choose X to maximize net revenues given the characteristics of
the farm and market prices. The Ricardian model is a reduced form model that

examines how several exogenous variables, F, H, Z and G, affect net revenues.

The Ricardian approach (Mendelsohn et al., 1994) is the primary method that J.
Wang et al., (2009) used in his/her analysis. The farmer chooses the crop and inputs
for each unit of land that maximizes:
Max rr = IPqiQi (Xi,Li,Ki,IRj,C,W,S)- IPxXi- IPmLi- IPnKi- IPiriRi

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(5)


where n is net annual income, Pqi is the market price of crop i,

Qi

is a production

function for crop i, Xi is a vector of annual inputs such as seeds, fertilizer, and
pesticides for each crop i, Li is a vector of labor (hired and household) for each crop
i, Ki is a vector of capital such as tractors and harvesting equipment for each crop i,
C is a vector of climate variables, IRi is a vector of irrigation choices for each crop
i, W is available water for irrigation, S is a vector of soil characteristics, Px is a
vector of prices for the annual inputs, Pm is a vector of prices for each type oflabor,
Pn is the rental price of capital, and Pir is the annual cost of each type of irrigation

system. Equation (5) is an expanded equation from equation (4). Li and Ki are two
main determinants to identify the physical effect to crop yield or crop productivity.

Furthermore, Coelli ( 1996) measure technical efficiency for the agricultural

production through data envelopment analysis (DEA) approach. The core
advantages of the DEA approach are (1) it can avoid parametric specification of
technology for production, (2) it does not need the distribution assumption for
inefficiency term.

Cristina (1998) used a constant returns to scale function of the three primary factors
of production such as land, labor, capital to estimate value added in agriculture.
This production function is considered as a useful tool for development, growth and
macro-economists. They often estimate the production function both the factors of
production and intermediate inputs while there are many estimations of production
function that assume constant returns to scale. Moreover, there were some
estimations of value added as a function of two factors of production such as labor
and capital. The usage of land may be negligible in other sectors, land is an
important source in agriculture.

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In general, economists applied widely the production function in their researches
such as analyze factors which affect to rice productivity; or measure technical
efficiency for the agricultural production; or estimate value added in agriculture of
the three primary factors of production - land, labor, capital; etc. And base on those
empirical studies, the author recognizes that main factors which directly affect to
water melon production are land, labor, seed, fertilizers and pesticides and dummy
variables (market information, agri-extension services in location, having
information from agri-extension). Furthermore, the author applied production
function under log-log and Cobb-Douglas form to (1) represent the relationship
between water melon productivity and input uses variables; (2) represent the
relationship between water melon productivity and dummy variables; (3) consider
water melon productivity will change how many % when every input variable

changes 1%; (4) to consider water melon productivity will change how many %
when every dummy variable changes 1%.

2.3 Analytic framework of this research
Conceptual model is constructed by combining factors of production of farm
household and some other factors that physical effect to water melon productivity.

The author finds out the potential factors which connect closely and directly to
water melon production. Figure 2.4 "conceptual framework" illustrates (1) the
relationship between the water melon yield with input uses variables such as
productive area, labor, chemical fertilizer amount, pesticides, seed, etc; (2) the
relationship between the water melon yield with dummy variables such as market
information, agri-extension service in location and information from agri-extension;
(3) and the relationship between input use variables and dummy variables in water
melon production process of Tien Giang province. From result of those
relationships, farmers should have suitable effects to get higher productivity and
consider how to minimize cost of those factors to get higher profit.

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Page 17