The Effects of Price-support Programme on Farm Tenancy Patterns and Farm Profitability: Some Evidence from Malaysia

Naziruddin Abdullah


Translog normalised restricted profit function model is
specified and estimated for the four rice granary areas, each
administered by a local government body, namely, the MIP, the KIP, the
NWSP, and the KEIP, in which the price-support programme has some
noticeable effects on farm tenancy and farms profitability. So far,
there have been no empirical studies that have used this methodological
framework to analyse such economic phenomenon in Malaysia. This, in
fact, is the main contribution of the present paper. From the estimated
function, the shadow values of land and labour are computed, which in
turn are used to elucidate the behaviour of rice farmers in Malaysia.
Together, the estimated and computed results, to a large extent, are
successful in explaining the observed changes in farm tenancy patterns
and the way the farmers (comprised of owneroperator, owner-tenant, and
tenant-farmer) are “economically” responding to the sum of profits
generated from rice farming and, subsequently, from the programme.
Further, given the price-support programme, the results also point to
the fact that rice farming in Malaysia is as lucrative a job as any
other sub-sector outside this, in particular unskilled urban workers and
electronics workers, and thus this programme could be pursued

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