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Evaluating the Economic Efficiency of Agricultural Activities in Developing Countries: Domestic Resource Costs and the Social Cost-Benefit Ration


  • Masters, William A.
  • Winter-Nelson, Alex


This paper demonstrates that the conventional Domestic Resource Cost (DRC) indicator is biased against factor-intensive, low-input techniques, and that a simple Social Cost-Benefit (SCB) ratio is generally a more appropriate measure of economic efficiency. The potential policy significance of improved measurement is shown with data from Zimbabwe and Kenya. In Zimbabwe, the DRC is shown to incorrectly rank high-input large-scale farming systems above more Jabour-intensive smallholder systems; in Kenya, the DRC incorrectly ranks high-input horticultural crops above more Jabour-intensive food grains and traditional export crops.

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  • Masters, William A. & Winter-Nelson, Alex, 1997. "Evaluating the Economic Efficiency of Agricultural Activities in Developing Countries: Domestic Resource Costs and the Social Cost-Benefit Ration," 1997 Occasional Paper Series No. 7 198201, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaaeo7:198201
    DOI: 10.22004/ag.econ.198201

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    References listed on IDEAS

    1. Srinivasan, T N & Bhagwati, Jagdish N, 1978. "Shadow Prices for Project Selection in the Presence of Distortions: Effective Rates of Protection and Domestic Resource Costs," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 97-116, February.
    2. Gonzales, Leonardo A. & Kasryno, Faisal & Perez, Nicostrato D. & Rosegrant, Mark W., 1993. "Economic incentives and comparative advantage in Indonesian food crop production:," Research reports 93, International Food Policy Research Institute (IFPRI).
    3. Anne O. Krueger, 1966. "Some Economic Costs of Exchange Control: The Turkish Case," Journal of Political Economy, University of Chicago Press, vol. 74, pages 466-466.
    4. Warr, Peter G, 1983. "Domestic Resource Cost as an Investment Criterion," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 302-306, July.
    5. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989, Elsevier.
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