Abstract:
El Salvador's land resources are intensively cultivated.
Labor is relatively abundant and wages are low. This study
analyzed the effects of government policies and observed farm
price distortions on enterprise/weed control system choices
and associated income-employment effects.
A regional linear programming framework was employed to
analyze the effects of alternative government policies and
observed farm prices on farm efficiency, employment, and income
distribution within Central El Salvador. A major conclusion
of the study was that the presence of price distortions
and off-farm employment alternatives were not sufficient
to induce changes in weed control technology on small
and medium farms. The most efficient system both from an
individual and social point of view was the use of manual
weed control for all selected enterprises. The principal effects
of price distortions on the small and medium farms
(when compared with their undistorted price solutions) were
the tendencies to reduce the number of selected enterprises
and to modify the area allocated between enterprises.
On the other hand, the process of capital-labor substitution
on large farm appeared to be sensitive to direct and
indirect government subsidies on capital when off-farm employment
alternatives existed between 0 and 50 percent of
total available labor supply. Herbicide-area diffusion
ranged from 75 to 87 percent of total area on the large farm
whenever the policy mix included direct or indirect capital
subsidies.
Comparisons of the alternative distorted price solutions
using the undistorted price solutions revealed that
whenever capital subsidies were present in any policy mix
when off-farm employment opportunities were held at 50 percent
of the available labor supply, total weed control employment
levels were lower than the social price solution by
45 to 55 percent. The group most seriously affected by weed
control employment reductions was the landless laborer. The
group's weed control employment losses ranged from 73 to 89
percent below their social price-employment solution.
The presence of capital subsidies in any policy mix
under the 50 percent off-farm employment opportunity solutions
induced relatively larger income gains (20 to 67
percent) to the three sizes of farms and income losses (3 to
13 percent) to the landless laborers. Production efficiency
losses were relatively high in each of the three sizes of
farms whenever capital subsidies were present.
In view of these findings the El Salvador government
should recognize a conflict between the use of direct and
indirect capital subsidies particularly on herbicides and
farm machinery and between stated national goals of increasing
employment and improving income distribution. Fixing the
wage rate at 3.85 cents/day induced relative income gains that
tend to favor the small farm and landless laborers . . . the
least privileged and the biggest group in El Salvadors' total
population. Output support induced equal relative income
gains (19 percent) to the three sizes of farms. Maintaining
subsidies on labor-using modern farm inputs (fertilizer, insecticides
and improved seeds) would provide incentives for
increasing grain production and intensify the widespread diffusion
of these inputs into the basic grain sector of El
Salvador.
