The Role of Social Capital on Increasing Agricultural Productivity

Transcription

1 The Role of Social Capital on Increasing Agricultural Productivity KDI School of Public Policy and Management

2 Motivation Most of conventional researches have shown that Korea could achieve the extraordinary economic development by accumulating factors of production (Krugman, 1994; Young, 1995; and Pyo and Kwon, 1991). Is it applicable to agriculture-based rural communities where community norms, cooperation, trust, information sharing among village people are relatively more important value than those in urban areas? Do we observe the faster growth of per capita yield in the community where village people are more likely to participate and cooperate in community-level projects? Then, can we say that not only factor accumulation but also productivity growth employed by social capital is one of sources of Korea s rural development? This paper uses Korea s experience, Kyungsangbuk-do province in the 1970s to verify the issue of whether social capital plays a role in increasing regional prosperity together with other kinds of capital.

3 Basic Framework of Neoclassical Growth Model (Solow, 1956) Source of sustainable growth Diminishing returns! LR growth determined by productivity growth, A.

4 Then, what are the sources of LR growth? Source of sustainable growth Diminishing returns There are attempts to explain the productivity growth by endogenizing A. Lucas (1988) explains that LR growth is possible via human capital accumulation without exogenous productivity growth due to externality Romer (1990) finds that LR growth rate is determined by the technological progress as in Solow model, i.e., the key determinants of LR growth are number of researcher and productivity of research sector MRW (1992) augmented the Solow model by including accumulation of human as well as physical capital. This paper focuses on the role of non-economic institution in economic development.

5 Rural Community Infrastructure Development Program in 1970 The government provided materials including cement and steel wires to be utilized only in community development projects with each village, about 32,000 villages throughout the country. A village naturally generated based on rice cultivation activities was assigned as a strategic development unit for Saemaul Undong. In order to successfully implement village projects, the government introduced the rewarding scheme that supports first to the village which shows the excellent progress on village projects.

6 Rural Community Infrastructure Development Program in 1970 Public Facilities Construction for Income Generation Village Infrastructure Development Agricultural Infrastructure Development Village Project Unit Long-term goal Result Achievement (A: as of 1971) (B: as of 1980) (%, B/A) Expansion of village roads km 26,266 43, Farm road km 49,167 61, Small bride one 76,749 79, Town hall one 35,608 37, Store house one 34,665 22, Workplace one 34,665 6, Shed one 32,729 4, Reservoirs one 10,122 13, Dammed pool one 22,787 31, Waterway km 4,043 5, River arrangement km 17,239 9, Housing improvement thousand dong Town improvement one 1, Portable water supply one 32,624 28, Sewage system km 8,654 15, Electricity thousand hh 2,834 2, Phone dong 18,633 18, Saemaul factory one Source: Ministry of Home Affairs, 1980

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9 Concluding remarks

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11 Resource mobilization in community project operation [Table 2] Resource mobilization in Saemaul projects (hundred million) Year Total (A+B) Total (A) Central government Local government % % % , ,020 77% ,959 1, ,306 44% ,226 1, ,575 48% ,665 2, ,138 2,205 47% ,342 3, ,957 2,958 47% ,582 4,252 1,258 1,010 1,984 3,330 44% Total 27,521 13,997 3,954 3,771 6,272 13,524 49% Source: Ministry of Home Affairs, 1980 Government support Loans Village residents' donation (B)

12 Rice yield was dramatically increased in the 1970s. [Figure 2] Rice production per 10a,

13 Agricultural productivity: HYV Tong-il [Figure3] Yield of Tong-il versus Ordinary variety,

14 Agricultural productivity: Saemaul projects The growth of agricultural productivity is closely related to Saemaul Undong because most of projects in early days of the initiative focused on building agricultural infrastructure such as reservoirs, dike, water ways, drainage, river arrangement, pumping station, and so on. By doing village-level projects together, people could accumulate not only experience and skill but also cooperation and trust among themselves while sharing and exchanging idea and information on the new technology. Agricultural Development Corporation was established in 1970 in accordance with Agricultural Community Modernization Act to promote agricultural productivity through the construction of large-scale agricultural production base including dam, irrigation, and land consolidation.

15 Agricultural productivity: fertilizer [Table 3] Production of fertilizer (m/t) Year Nitrogen fertilizer Phosphatic fertilizer Potassium fertilizer Total , , , , , ,543 49, , , ,676 46, , , ,569 54, , , ,292 65, , , ,195 69, , , ,475 81, , , ,780 83, , , , ,796 1,088, , , ,686 1,330, , , ,854 1,437, , , ,762 1,329,733 Source: National Agricultural Cooperative Federation, Statistical Yearbook (1981)

16 Agricultural productivity: fertilizer [Table 4] Consumption of fertilizer (thousand m/t, %) Year Nitrogen fertilizer Phosphatic fertilizer Potassium fertilizer Total Quantity Ratio Quantity Ratio Quantity Ratio Quantity Ratio Source: NACF, 20 Year History of Agricultural Cooperatives (1985)

17 Agricultural productivity: pesticide [Table 5] Production of pesticide (m/t) Year Germicide Insecticide Herbicide etc. Total ,677 9,456 5, , ,437 12,906 8, , ,461 18,088 10, , ,176 31,445 14, , ,983 30,757 18, , ,823 49,773 25, ,760 Source: NACF, Statistical Yearbook (1976)

18 Agricultural productivity: agricultural machinery [Table 6] Supply of agricultural machinery Machine Cultivator 6,060 7,736 25,243 27,970 41,933 41,387 45,316 53,534 Tractor Duster 1,964 1,850 6,274 8,013 9,476 11,478 10,191 12,068 Iron sprayer 15,517 15,500 15,625 17,859 20,949 27,476 35,231 44,897 Water pump 2,067 2,927 3,991 3,718 13,671 14,476 17,291 9,717 Transplanter ,758 Sowing machine ,019 1, Thresher 848 1,350 4,673 5,288 6,025 6,110 5,740 6,023 Harvester ,005 8,558 Dryer Cutter Total 26,485 29,394 56,035 64,005 92, , , ,453 Source: Ministry for Food, Agriculture, Forestry and Fisheries

19 Agricultural productivity: social capital Social capital employed by doing community-level common projects during the 1970s facilitated cooperation and participatory mechanism by reducing transaction costs. According to Putnam, social capital refers to features of social organization such as trust, norms, and networks that can improve the efficiency of society by facilitating coordinated actions. Putnam (1993) explains that the differences in the economic performance between northern and southern regions of Italy are corresponded by the differences of social capital. Coalition and reputation (Greif, 1989) Associational activity (Narayan and Pritchett, 1996; Knack and Keefer, 1997)

20 Measurement of social capital The proxy variable for social capital accumulated by doing agriculture-related project j at county i in year t defines: SSSSSS ccccccc ii = 9 j=1 PP iii 9 j=1 TT iii where TC denotes total village project cost and PD is village people s donation in communitylevel development projects. This proxy for social capital is endogenous: SSSSSS ccccccc ii = z 0 + z 1 y ii + z 2 x ii + θ i + μ t + ε ii where y ii is level of per capita yield at county i in time t and x ii is a vector of other variables.

21 Empirical strategy g i = a + β yyy i +μss i + θx i + u i g i denotes the growth rate of per capita rice yield and SS i is a proxy for social capital at county i. yyy i denotes initial per capita yield in 1971 and verifies the convergence. Control vector X i includes farm population, consumption of fertilizer and pesticide, number of agricultural machines, number of agricultural extension workers. u i is a random error.

22 Data: 28 administrative counties (gun) of Kyungsangbuk-do, [Figure 4] Village people s participation in community projects,

23 Data: Growth rate varies across counties. [Figure 5] Growth rate of per capita rice yield,

24 Data [Figure 6] Rice yield, [Figure 7] Farm population,

25 Data: convergence? [Figure 9] Growth rate versus Level of per capital initial rice yield

26 Basic results: OLS Explanatory variables (1) (2) (3) (4) (5) (6) ln(yldpc71) *** *** *** *** *** *** (2.931) (3.017) (2.992) (2.411) (3.046) (2.484) growth rate of pop (0.275) (0.325) (0.236) (0.196) (0.316) (0.244) ln(machine) (2.022) (3.735) (2.043) (1.851) (3.266) (2.542) ln(fertilizer) * (2.069) (2.916) (2.398) (2.048) (2.871) (2.232) ln(pesticide) (3.601) (5.418) (3.350) (2.850) (4.251) (3.290) ln(ext.worker) 30.38*** 30.27*** 27.27*** 18.74** 27.33*** 18.00** (7.260) (7.555) (7.672) (7.690) (8.036) (7.846) ln(participants) (0.787) (0.645) (0.431) ln(social capital) 5.761* 5.913* (2.756) (3.098) ln(sk*yldpc) 7.325*** 7.910*** (1.902) (1.886) Constant ** ** *** * *** (12.35) (17.35) (20.14) (13.15) (25.63) (14.36) Observations R-squared Note: Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1

27 Basic results: initial per capita rice yield [Figure 10] Growth rate versus Level of per capital initial rice yield

28 Basic results: social capital [Figure 11] Growth rate versus Level of social capital

29 Basic results: extension worker [Figure 12] Growth rate versus human capital

30 Concluding remarks Try to endogenize the productivity growth through behavioral changes of village people in the face of comprehensive community development initiative in the 1970s Productivity growth is largely due to new technology adoption, however, social capital accumulated in doing village projects matters as well! Limitations