DETERMINANTS OF RICE SUPPLY IN BANGLADESH : A CASE OF PROFIT FUNCTION APPROACH USING CROSS SECTION DATA

As rising fertilizer prices translate into bleak implication for "apparent" incentives for rice production-an undoubtedly important segment of Bangladesh's rural economy-a research question assumes key importance. Of price and nonprice class of variables determining rice output, which is more potent? We answer this question using a cross-section data set for 1989/90 on the basis of a profit-function based approach. Use of cross-section data is justified on account of timeseries data being unable to evaluate the absorption of fixed factors as required by the analytical method chosen. This of course means that the time frame is the long, and not the short run. We show that prices overall are more often insignificant determinants of rice output, while nonprice variables-farm size, the adoption of high-yielding-variety (HYV) technology and farmer's managerial ability-often register statistically significant influences on rice supply. Within the class of price variables, the wage rate is alone that decisively matters to output in the aman season; fertiliser prices, the cause of much recent discussion, do not make any difference to output supply. In the long run, it is the price of labour and not fertiliser prices that deserve more analytical and policy attention. It is adaptive research on, and the diffusion of, modern rice technology, and access to education and capital by the farmer that is more fundamentally important to rice production. In the atmosphere of Bangladesh today, this finding, however trite and shopworn, can take a wellattended recital, de novo.