Rice policies in Sri Lanka: analysis of supply response with endogenous technology
Atapattu, Nihal K.
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Sri Lanka achieved a high level of self-sufficiency in rice in the 1980s through a series of investments on irrigation, technological change, and marketing and trade policies. However, more than two decades of expansion in the international rice market has diminished the validity of rice self-sufficiency policies as an economic development strategy. As a consequence, trends in the international market through their impacts on reducing investments such as rice research, extension, and irrigation development have adversely affected the ability of Sri Lanka to maintain the same levels of rice selfsufficiency in the future. In the domestic policy area however, some degree of indecision exists in undertaking reforms necessary to take advantage of the trends in the international rice economy. Given the overwhelming influence rice has on the direction of national agriculture policies in Sri Lanka, it is critical to resolve this indetemlinacy pertaining to rice policies. The objectives of the present study are to estimate the producers' response to numerous policy variables that impact on the levels of rice production, and the country's ability to manage food-security under a regime of market-friendly policies. A supply response model based on the choice of technique approach with endogenous determination of technology was specified to capture the effects of policy variables on rice output determination. The dynamic effects of technology, prices, and investments on productivity are therefore accounted for in the modeL The supply response system is composed of blocks of equations for determination of investment in quasi-fixed inputs, choice of technology, and yields. Data for the period since 1974 during which notable changes took place in the rice supply situation in Sri Lanka were used in the analysis.. Results suggest that a major share of rice output growth in Sri Lanka is explained by the producers' response to government-supplied, technology-related variables such as irrigation and research. Rice supply response to input and output prices was slight relative to the response to technology variables. Model simulations showed that, under a regime of more market friendly policies, continuation of current investment trends and policies would lead to a worsening of rice self-sufficiency levels over the next 10 years. It was also observed that with modest growth in irrigation and research investments, it is possible to maintain rice self-sufficiency at levels comparable to the present.
- Doctoral Dissertations