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

The Cobb-Douglas (CD) Function has some well-known properties that
justify its wide application in economic literature (Henderson and Quandt. 1971).
It is a homogeneous function that provides a scale factor enabling one to measure
the returns to scale and to interpret the elasticity coefficients with relative ease.
But. at the same time, the CD function makes several restrictive assumptions. It
is assumed that the elasticity coefficients are constant, implying constant shares
for the inputs. The elasticity <strong>of</strong> substitution among factors is also assumed to be
unity in the CD function. The estimates <strong>of</strong> the input elasticities have been
worked out using the Ordinary Least Squares (OLS) method and have been
presented in table 6.21.
Table 6,21: Crop-wise input elasticities and returns to scale in Peechi
proJec . t
-
I
1I1pill Elaslicilies
Variables
Coconut Coconut
Coconut Banana I Arecanut Paddy & &
banana arccanut
, Intercept -52.198 -17.65 14.89 28.93 -5395 8.89
(-0.0801 (-1682) (0.648) ( 1748) (-1.662) (0.929)
XI 0.709 0.031 -0.015 0.464 0.132 0.056
(OFD Exp.) (6.35) (\853) (-0.305) (1.886) (2.604) (0.962)
X2 0.286 0.030 1.009 0.207 -0.061 0.423
(Lab. Cost) (5.422) (1.202) (2492) (1.445) (-0.654) (8.138)
X3 0.010 0.079 0.004 0.277 0.569 0.354
(Mat. Cost) (0.283) (3.118) (0.43:U ( 1.876) ( 4.269) (4.686)
X4
0.076 0.486 0.012 -0.251 0.141 0.211
(Power
( 1.544) (0849) (0.855) (-0.251) (0.984) (2.928)
Charges)
X5 0.005 0418 -0.011 0.252 -0.047
-----
(Irr. Charges) (0.089) (0.729) (-0.736) (2.832) (-1.432)
Returns to
scale
1.086 1.044 0.999 0.697 1.033 0.997
R square 0.286 0.568
.
0.642 0.382 0.678 0.581
~
Sample size
( no.)
95 95 95 51 95 95
D- W statistic 1.834 2.08 2.03 1.80 2.28 1.84
Note: Figures •
In parentheses are the respective t raltos.
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