Improving Labour Productivity of Smallholder Dairy Farmers: A Case Study from Kurunegala and Anuradhapura Districts

Abstract

Understanding factors affecting smallholder dairy farmers’ productivity is essential to implement dairy sectors’ policies in Sri Lanka. Using a sample of farmers from the two main dairy producing districts in Sri Lanka, factors contributing to marginal productivity increases of labour is assessed. Improving labour productivity in the dairy sector is of importance because dairying is a highly labour intensive production activity. We use a two stage estimation process to assess the factors contributing to higher productivity. In the first stage, a Cobb-Douglas production function is estimated. Results of this is used calculate the marginal product of labor for each farmer, which is related to policy variables in a secondstage regression. Results reveal that addition of labor hours into production by educated and experienced farmers increase production while labor hours spent by the older farmers tend to reduce productivity. Additional labor hours spent by larger farmers are more productive than smaller farmers. Training and extension provided positive signs, although not significant in the present data set. Involvement in off farm work proved to be increasing marginal product of labour. The paper concludes that the development of human capital and increasing herd size may prove to be important in maintaining continuous supply of farm labor in the years to come. DOI: http://dx.doi.org/10.4038/jfa.v2i2.4176 JFA 2009; 2(2): 16-21