The impacts of government market intervention on weed control technology, income and employment : a case study of basic grain farms in El Salvador, Central America Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/s7526g353

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  • 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.
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