Abstract
Vietnamese rice production has achieved remarkable success over the last couple of decades. This is due to land and market reforms, known as ‘Doi Moi’. There were noticeable changes in policies, such as land and production systems, which were transformed from a collective to an individual contract system in the 1980s. Vietnam made progress in rice production through the legalisation of the privatisation of farm properties and a huge investment in irrigation systems. The country not only ensured its domestic demand, but also started exporting rice and gradually became the second largest exporter in the world. An estimate of the Constant Elasticity of Substitution function (CES) for Vietnam’s rice production is essential for the government to design effective policy on agricultural production. This study makes the first attempt to estimate the nested CES model for Vietnamese rice production in 2012. The paper finds that the elasticity of substitution of Vietnam's nested CES model lies between 0.44 and 0.46. The results indicate the weak substitutability between land and the capital-labour composite in the nested CES model. This also suggests that it is impossible to take labour as the substitutable factor for land and capital.
Highlights
In the Vietnamese agricultural sector, rice production is considered the most important industry since it plays a vital role in agricultural and rural economic development
The aim of this study is to address these questions by first identifying which Constant Elasticity of Substitution function (CES) models are appropriate for Vietnam’s rice production
The lists of variables used in the model and the summary statistics for Vietnam’s rice production quantity, weighted index for labour and the area of land for rice production in 2012 can be seen in Table 1 and Table 2
Summary
In the Vietnamese agricultural sector, rice production is considered the most important industry since it plays a vital role in agricultural and rural economic development. Rice is an absolutely indispensable source of nutrition to millions of Vietnamese people and rice production contributes noticeably to ensuring national food security. Before 1980, rice production could not meet the consumption demands of the country; the country had to import rice exceeding 1.5 million tons during the 1970s (GSO, 1995).
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