Cross-Regional Productivity Differences and the Effect of a Government Program: The Case of Philippine Rice and Corn and The Operation Land Transfer (OLT)

Abstract

The principal objective of the study was to analyze the differences in regional productivity of rice and corn and determine the effects of Operation Land Transfer (OLT) on rice and corn productivity in the Philippines. Regional TFP indices for rice and corn were constructed using 1991 data and the effects of OLT, other services and regional factors on TFP were determined. The constructed input, output and TFP indices show how the values differ as affected by price and quantity aggregation. The Fisher indices lay between Laspeyres and Paasche indices. In terms of regional differences, it was observed from the indices that outputs varied more widely than inputs across regions. This implies that the variation in TFP across region can be attributed more to output than to input. In general, there were variations in the relative sizes of input and output indices across regions, but in terms of TFP indices, the relative position of each region with respect to the base did not vary widely. Southern Mindanao and Central Luzon exhibited the highest aggregate TFP although the output index was higher for Central Luzon. Aggregation affected the relative ranking of regions in terms of TFP. For rice, Southern Mindanao, Cagayan Valley and Central Luzon led while for corn, Central, Southern and Northern Mindanao regions dominated. In general, aggregate TFP values lay between rice and corn TFPs, except for a few cases. From the OLS results, OLT had a positive overall effect upon rice and corn aggregate TFP. The results were relatively better for rice than for corn. This was because most of OLT land distribution and the corresponding support services, like irrigation and including those which were not part of the Comprehensive Agrarian Reform Program (CARP), were extended to rice regions which has a larger share at the program. Also from OLS, the irrigation variable showed significant effects for rice TFP while the effects of credit and rainfall were not significant.