economics of on-farm development - Institute for Social and ...

6.2.1.3 Crop diversification and returns to scale in the Peechi project
An analysis <strong>of</strong> the impact <strong>of</strong> irrigation on crop-diversification as well as the
pr<strong>of</strong>itability <strong>of</strong> alternate crops grown under we)) irrigation In the Peechi
command is presented below. This is to bring out the importance <strong>of</strong> cropdiversification
in canal commands to achieve higher returns to scale under
assured supply <strong>of</strong> canal irrigation. The analysis is carried out using the Cobb-
Douglas Production function approach in the log-linear framework. The
functional form is expressed as:
The above function is transformed in the log-linear form and is expressed as:
Where:
Y = Income from crops:
XI = OFD Expenditure:
X 2 = Labour Cost;
Xl = Material Cost;
X 4 = Power Charges;
X 5 = Irrigation Charges.
The inputs arc expressed in rupee terms. PI. P2. PJ. P4 and Ps are the
regression coefficients showing the input elasticities <strong>of</strong> individual resources. The
sum <strong>of</strong> the beta coefficients indicates the returns to scale. The returns to scale are
increasing. constant or decn:a,ing depending upon the sum <strong>of</strong> regression when
coefficients is greater than. equal to. or less than unity.
253