Analyzing the economies of crop diversification in rural Vietnam using an input distance function

Abstract

The farming system in Vietnam is being transformed by integration between a set of cash crops and main food cropping operations. This transformation into diversified farming systems, where smallholders have a production base in rice, can affect output complementarity, technical efficiency, and performance of farms. This study aims to evaluate the economies of crop diversification in rural Vietnam by using the approach of the input distance function. The empirical results reveal that slightly increasing returns to scale are evident in Vietnam's multiple crop production. In addition, the increase in rice production reduces the marginal utilization of inputs for producing other crops. Significant output complementarity is found between rice production and other crops. This finding also implies the potential presence of economies of scope.Another finding is that there is substantial technical inefficiency in multiple-crop farming implying opportunities to expand crop output by 18.7% without greater use of inputs or improved technologies in farm production. The improvement of education, particularly for women and the reduction of the dependency ratio contribute to improving technical efficiency. The estimated result shows that the impact of women's education on technical efficiency is much greater than the impact of men's education. Furthermore, land reforms aimed at the reduction of land fragmentation and proper land rights contribute to improving technical efficiency. Finally, the participation in nonfarm employment and crop diversification are also identified as efficiency policy variables in Vietnam's agricultural development.