A benefit incidence analysis on the far-reaching effects of paddy-field consolidation projects

Abstract

A paddy-field consolidation (PC) project was carried out with large subsidies as a public investment by prefectural governments in order to improve agricultural productivity in Japan. The purpose of this study is to analyze the quantitative benefits and costs of the PC projects. A benefit incidence (BI) analysis was used in view of the far-reaching effects on farmers to consumers. The results were as follows. First, with the recent decline in rice price, certain farmer benefits primarily derived from the projects have been transferred to consumers through rice price. The transfer ratio was more than half of the total improvement effect of rice productivity which occurred on the farmers’ side, and all economic sectors including farmers and consumers received net benefit even though all sectors paid construction costs or taxes. Therefore, maintaining flexibility in rice price plays an important role to secure net benefits and obtain an agreement of all people involved in the project. Second, some benefits with regard to effects on the rural environment that was not expected at the time of planning were revealed on many project sites. Evaluating these intangible effects will be more important for the tax payers in order to evaluate how the environment friendly planning of the project achieved benefits.