Production Structure and Productivity of Japanese Agriculture

Volume 2: Impacts of Policy Measures

Y. Kuroda

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137287632
• eBook ISBN: 9781137287649
• Topic: Business
• Subtopic: Business General
• Index: Business

Analyzes quantitatively in a comprehensive, consistent, and integrated manner the production structure and productivity of postwar Japanese agriculture for the latter half of the 20th century, more specifically, 1957-97.

Part I

Impacts of Policy Measures on Postwar Japanese Agriculture

1

Impacts of Output Price-Support Programs on Postwar Japanese Agriculture 1965–97: A Variable Profit Function Approach

1.1 Introduction

One of the primary concerns in Japanese agriculture since the Basic Agricultural Act was enacted in 1961 has been the implementation of more efficient and productive large-scale farming. This concern has received even greater attention because of persistent pressure from foreign countries for liberalizing Japanese markets of agricultural commodities. Accordingly, the transition from small- to large- scale farms has been heavily promoted, and various policy measures have been introduced by the government; revisions of the Farmland Act in 1970 and 1980, launching of the Farmland Utilization Promotion Project in 1975, and the passing of the Farmland Utilization Promotion Act in 1980.

To assess the effects of these policies on a shift to more efficient larger-scale farming, Tables 9.1 and Table 10.1 in Volume 1, for Tofuken and for all Japan, offer general information on farmland movements.

Furthermore, Table 10.1 presents the numbers of farm households by size of cultivated land area. We will also review the findings obtained in that table.

By reviewing these tables we have observed that, in spite of the government’s efforts to promote land movements, the transition from small- to large-scale farming has not made significant progress against our expectations. One major reason for this limited change has been the rapid increase in the market price of farmland, which has been caused in large part by the strong demand for land for non-agricultural purposes such as construction of highways, railways, factories, and residential areas. This demand for land by the non-agricultural sectors has given farmers strong incentives to keep their lands as profitable assets.

Thus, the point of this chapter is that we will shed a special light on quantitative investigations of an important cause within agriculture for the high farmland prices. As shown in Table 1.1, price-support programs have been an important agricultural policy measure. Furthermore, since production levels of wheat and barley were very low during the study period¹ 1965–97, the budget assigned to price-support policies for rice, wheat, and barley shown in column (iv) in Table 1.1 has in fact been allocated mainly to rice. In this sense, rice price-support programs have been a critical policy instrument in postwar Japanese agriculture from the early-1960s until the current date.

On the other hand, though not as heavily as rice as shown in column (v) in Table 1.1, the prices of livestock products have also been supported either in direct or indirect forms through the Livestock Production Promotion Programs, since livestock products have been most important demand-increasing agricultural products of the ‘Selective Product Expansion Programs’ of the Basic Agricultural Act.

At this point, we will briefly observe the movements of prices and the amounts of production of crops and livestock in Figures 1.1 and 1.2, respectively. At a glance at Figure 1.1, we observe much sharper increases in the price of crops than livestock, especially from 1975 up to 1997. This may reflect the sharp increases in the budget for rice price-supports during the 1970s and 1980s.

On the other hand, the prices of livestock products were stagnant from the late-1970s. This may reflect the drastic increase in the supply of milk due mainly to the scale enlargement of milk production during the study period 1965–97. As a result, the terms of trade of livestock to crops declined consistently during the entire study period. Conversely, according to Figure 1.2, the total amount of crop production was stagnant or even had a decreasing trend, which seems to have been consistent with the movements of rice production. On the other hand, livestock production increased consistently from 1960 to around 1992, but after that it was stagnant or even slightly decreasing. However, it is noted that the amount of production of livestock has surpassed that of rice since as early as 1980.

Table 1.1 Agricultural budget, 1960–99 (unit: 1 billion yen)

Notes: (1) Figures in parentheses in column (ii) are the shares of agricultural budget in the national budget in per cent.

(2) Figures in parentheses in column (iii) are the shares of the budget for price-support policies in the total agricultural budget in per cent.

(3) Figures in parentheses in column (iv) are the shares of the budget for price-support policies for rice, wheat, and barley in per cent.

(4) Figures in parentheses in column (v) are the shares of the budget for price-support policies for livestock in per cent.

Source: Statistics Department, the MAFF. The Nogyo Hakusho Fuzoku Tokeihyo [ the Appendix Tables of Agricultural White Paper ], Government Printing Office: Tokyo, 1999, pp.20–1.

Now, we hypothesize in this chapter that price-support programs during the last half of the 20th century gave more advantages to smaller-scale farms than to larger-scale farms in increasing such important economic indicators as the supplies of both crops and livestock, the maximized profits, the shadow price of farmland, and even scale economies, which may have limited the transition of farmland from small- to large-scale farms. To empirically verify this hypothesis, we will introduce a multiple-product variable profit (VP) function framework where labor and land are assumed to be quasi-fixed factor inputs.

Figure 1.1 Price indexes of crops and livestock and the ratio of the two price indexes for 1960–97 at 1985 prices

Source: The PWRV, the Statistical Bureau of the MAFF:Tokyo, various issues. Refer to Appendix of 1.1 in Volume 1 for detail.

We specify the multiple-product VP function as an ordinary translog type and estimate the system of equations composed of the multiple-product ordinary translog VP function, two output revenue-profit share equations, and three variable factor input cost-profit share equations. Based on the estimated parameters, various economic indicators such as the maximized profits, the degrees of RTS, and the shadow value of farmland will be computed for all observations of different size classes for the entire period 1965–97.

In addition, we will estimate the impacts of changes in prices of crops and livestock on (i) the supplies of crops and livestock, (ii) the demands for variable factor inputs, (iii) the maximized profits, (iv) the degrees of RTS, and (v) the shadow value of land. The estimation of these economic indicators and the impacts of the price-support programs on them will be carried out for different size classes for the entire study period 1965–97, so that we will be able to examine whether or not these impacts were farm size neutral. To be more specific we will ask a critical question, namely, which were more successful in obtaining gains from the price-support programs during the study period 1965–97; smaller- or larger-scale farms?

Figure 1.2 Amounts of production of total crops, rice, and livestock for 1960–97 at 2000 fiscal year prices

Source: The Social Account for Agriculture- and Food-Related Industries, the MAFF: Tokyo, 2004. Refer to Appendix 1.1 in Volume 1 for detail.

Although several researchers have estimated the shadow value of land for Japanese agriculture (e.g., Egaitsu and Shigeno (1983), Shigeno and Egaitsu (1984), Kuroda (1988a, 1988b), Kuroda (1992), Kusakari (1989), Kusakari (1994)), none has empirically documented the impact of price-support programs on the shadow value of farmland. This chapter may be the first attempt to present such influence in quantitative terms an...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Tables
• List of Figures
• Preface to Volume 2
• Part I  Impacts of Policy Measures on Postwar Japanese Agriculture
• Notes
• References
• Index