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Comparative Advantage and Cost Efficiency of Rice-Producing Farms in Bangladesh: A Policy Analysis

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  • Islam, Mohammad Ariful

Abstract

This study aims to investigate whether Bangladesh rice still has comparative advantage if fertilizer subsidy is lifted up, and to what extent the reduction of cost inefficiency raise comparative advantage. For that purpose, we calculate “Domestic Resource Cost (DRC)” as an indicator of comparative advantage, and estimate “cost inefficiency indicator” applying stochastic cost efficiency approach, using Bangladesh Integrated Household Survey data. Based on these indicators, we estimate the impacts of abolishing fertilizer subsidy program and improving cost efficiency on comparative advantage of Bangladesh rice. The results of analyses show; 1) dry season rice has comparative advantage while wet season rice does not, if fertilizer subsidy program is abolished; 2) if fertilizer subsidy is abolished, comparative advantage in overall rice production vanishes; 3) improvement of cost efficiency has positive effects on retrieving comparative advantage even if fertilizer subsidy program is abolished. These findings suggest that there is a scope for Bangladesh to increase global competitiveness by increasing cost efficiency of the rice farms targeting gradual reduction of input subsidy.

Suggested Citation

  • Islam, Mohammad Ariful, 2016. "Comparative Advantage and Cost Efficiency of Rice-Producing Farms in Bangladesh: A Policy Analysis," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 52(3), pages 85-96.
    • Handle: RePEc:zbw:espost:243104
    DOI: 10.7310/arfe.52.85
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    References listed on IDEAS

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    1. Banik, Arindam, 1994. "Technical Efficiency of Irrigated Farms in a Village of Bengladesh," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 49(1).
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    3. Coelli, Tim J., 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(3), pages 1-27, December.
    4. Timothy J. Coelli & D.S. Prasada Rao & Christopher J. O’Donnell & George E. Battese, 2005. "An Introduction to Efficiency and Productivity Analysis," Springer Books, Springer, edition 0, number 978-0-387-25895-9, September.
    5. Shahabuddin, Quazi & Dorosh, Paul A., 2002. "Comparative advantage in Bangladesh crop production," MSSD discussion papers 47, International Food Policy Research Institute (IFPRI).
    6. Tim Coelli & Sanzidur Rahman & Colin Thirtle, 2002. "Technical, Allocative, Cost and Scale Efficiencies in Bangladesh Rice Cultivation: A Non‐parametric Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 607-626, November.
    7. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. Islam, Mohammad Ariful & Sarkar, Md. Abdur Rouf & Rahman, Mohammad Chhiddikur & Rahaman, Md. Shajedur, 2021. "Assessing the Level of Comparative Advantage for the Boro Rice Production in Bangladesh: A Time Series Analysis," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(3), pages 361-370.
    2. Rahaman, Md Shajedur & Haque, Sadika & Sarkar, Md Abdur Rouf & Rahman, Mohammad Chhiddikur & Reza, Md Salim & Islam, Mohammad Ariful & Siddique, Md Abu Bakr, 2021. "A Cost Efficiency Analysis of Boro Rice Production in Dinajpur District of Bangladesh," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1), pages 67-77.

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