The Marketed Surplus of a Subsistence Crop: Paddy Rice in Taiwan

Abstract

The price response of the marketed surplus of subsistence crops is a topic of major concern to agricultural planners in developing countries. Recent attempts to measure the relevant elasticities by Bardhan, Haessel, and Toquero et al. have significantly added to understanding the magnitudes involved but seem to possess potentially serious methodological limitations. First, they do not explicitly consider the of marketed surplus. Haessel recognizes the existence of in-kind disposals but assumes them to be fixed by contractual arrangements and hence insensitive to changes in price. If the barter component is large, even a small response to a change in price may be important for policy purposes. A second limitation is the assumption that sales and on-farm consumption are strict complements, so that it is necessary to consider the price response of either marketing or consumption but not both. While this results in considerable simplification, it ignores the farmer's additional option of simply adding to (or subtracting from) existing stocks. The present paper considers the marketed surplus of paddy rice in Taiwan, a case in which the barter component is important. For a sample of farm households in the middle rice region of Taiwan, paddy rice used to pay in-kind household and farm expenses amounted to over 60% of cash rice sales for the period 1962-72. The simple approach adopted disaggregates total marketed surplus into cash sales and barter components and also allows for separate estimation of the price and output elasticities of on-farm consumption. A further departure from previous studies is that the estimation is based on time-series data. The approach generates what appear to be quite reasonable estimates of the price and output elasticities and suggests that the numerical results of studies that ignore the barter components of marketed surplus may require qualification. Following a brief discussion of the nature and limitations of the available data, the estimated s ructural equations are described, the elasticity estimates derived, and the conclusions summarized and qualified.