Choice of rice production technique in Thailand, 1890-1940

Abstract

This study analyzes the choice of rice production technique in Thailand during 1890-1940. It focuses on two techniques: transplanting and broadcasting. Although transplanting has been the traditional rice growing method in Thailand at least since the seventeenth century, most cultivators in the newly developed areas of the commercialized Central Plain during the period adopted broadcasting. The two conventional explanations for choice of rice production technique--Iocal water conditions and factor prices--cannot consistently explain this choice. The water conditions necessary for transplanting rice did exist in the area, and factor prices during the period moved in favor of transplanting. Because the two techniques differ both in terms of variable input per unit of land and fixed capital input, a choice of technique model is formulated using the theory of production and the theory of investment to explain the choice of broadcasting. The model is a neoclassical production relation modified to incorporate fixed capital input and the firm's planning horizon. In this regard, the model allows a simultaneous analysis of the firm's short-run production decision and long-run capital investment. Empirical evidence regarding rice farming during the period is consistent with theoretical constructs. The main findings reveal that the choice of broadcasting during the period is a rational decision. The outcome was caused by uncertainty in land ownership and prices, which were consequences of increased external demand for rice and economic changes in Thailand at the time. Under uncertainty in land ownership, a short planning horizon and consequently a technique such as broadcasting which requires less fixed capital input minimizes expected losses. Under price uncertainty, broadcasting provides greater production flexibility and, consequently, higher profits for large landholding firms. This study contributes to conventional knowledge regarding factors affecting choice of rice production technique and, thus, improves the understanding of a firm's choice of technique. Although the model is simple and empirically oriented, it is adequate to analyze a firm's decision making process. The findings also illuminate relationships between external trade, internal institutions, and agricultural development. While the empirical results presented are specific to Thailand, the process employed here can be applied elsewhere.