Agricultural biodiversity, farm level technical efficiency and conservation benefits an empirical investigation

AGRICULTURAL BIODIVERSITY, FARM LEVEL TECHNICAL EFFICIENCY AND CONSERVATION BENEFITS: AN EMPIRICAL INVESTIGATION THIS DISSERTATION IS SUBMITTED TO THE FACULTY OF BUSINESS, QUEENSLAND UNIVERSITY OF TECHNOLOGY FOR THE DEGREE OF DOCTOR OF PHILOSOPHY MAY 2012 K.M.R Karunarathna B A (Economics) Hons., University of Peradeniya, Sri Lanka M.Sc (Environmental Economics), University of Peradeniya, Sri Lanka School of Economics and Finance QUT Business School Queensland University of Technology Gardens Point Campus Brisbane, Australia i Statement of Original Authorship The work contained in this thesis has not been previously submitted to meet requirements for an award at this or any other higher education institution To the best of my knowledge and belief, the thesis contains no material previously published or written by another person except where due reference is made …………………………………… K M R Karunarathna 21st May, 2012 ii This dissertation is dedicated to: To my loving husband, Wasantha son, Kavindu and daughter, Disuni To my mother, father and all who helped me to make it true iii ACKNOWLEDGEMENTS I greatly acknowledge the assistance I received from numerous individuals and institutions for completing this research Special thanks should go to my advisers, Professor Clevo Wilson and Professor Tim Robinson, for their constant support and guidance throughout my graduate program Their kindness, patience, and continual coaching are greatly appreciated They encouraged me to carry out this interesting dissertation research and for their invaluable advice, guidance, endless encouragement and untiring efforts to make it a success They provided a stimulating environment with productive discussion throughout the dissertation research that helped make me a better researcher I am grateful to them for their support and wisdom, and the kindhearted assistance extended to me throughout the study period I am also thankful for the invaluable help and encouragement I received from my dissertation committee members Dr Mark McGovern, Dr Henri Burgers, Prof Tim Robinson and Prof Clevo Wilson I also would like to thank the panel members of my PhD confirmation seminar, especially Dr Louisa Coglan, for her constructive comments People who are living in Anuradhapura, Kurunegala and Ampara districts deserve my thanks for their cooperation in the data gathering effort I greatly appreciate the help given by many individuals including enumerators and government officers during the data collection process I thank the University of Peradeniya for granting me study leave, staff members in the Department of Economics and Statistics who encouraged me to pursue my postgraduate studies at the Queensland University of Technology in Australia iv I must recognize the constant help given by my colleagues at the School of Economics and Finance, for their assistance and cooperation throughout the course of study I am also thankful for the invaluable help and encouragement I received during my QUT life from Dr Tony Sahama in the faculty of IT I also should thank to Dr Jeanette who helped me correct English in this dissertation I thank participants of local and international conferences for providing useful feedback and facilitating discussion on this work that I have presented to them I have benefited a lot from working with them I gratefully acknowledge the role of Queensland University of Technology for providing financial support for my graduate studies It is only with the help of QUT’s IPRS scholarship, I was able to undertake this study in Australia I therefore acknowledge and thank QUT for awarding me this scholarship Further, I gratefully acknowledge the role of National Centre for Advanced Studies in Humanities and Social Sciences (NCAS) for providing financial support for my PhD research I am also thankful to Professor Tim Robinson, former head of the school, School of Economics and Finance, and all other administrative staff of the faculty of business for their invaluable service received during my study period at QUT Last but not least I wish to express my deep gratitude to my husband, Wasantha for his understanding, patience and encouragement throughout my graduate studies I am indebted to my loving son, Kavindu and daughter, Disuni As I had to spend considerable time on this study, they missed their mum during the time in the first few years in their life Finally, I am deeply grateful to my beloved mother for her invaluable contribution throughout my life I also owe a debt of gratitude to my late v father I also acknowledge my brother, sisters and their families, for their unconditional love inspiration and encouragement throughout my life vi TABLE OF CONTENTS STATEMENT OF ORIGINAL AUTHORSHIP …………………………… ii DEDICATION……………………………………………………………… iii ACKNOWLEDGEMENTS ……………………………………………… iv TABLE OF CONTENTS…………………………………………….……… vii LIST OF TABLES……………………………………………………….… xi LIST OF FIGURES………………………………………………………… xii LIST OF ABBRIVIATION………………………………………………… xiii ABSTRACT……………………………………………………………….… xv CHAPTER 1: INTRODUCTION……………………………………….……… 1.1 Overview …………………………………………………….… …… 1.2 Motivation …………………………………………………….……… 13 1.3 Expected contributions of the study…………………………….…… 16 1.4 Structure of the thesis………………………………………….…….… 18 CHAPTER 2: STATUS AND TRENDS OF BIODIVERSITY IN SRI LANKA 20 2.1 Biodiversity wilderness area in the world………………………….… 20 2.2 Biodiversity in Sri Lanka ……………………………….………….… 22 2.3 Present status and future challenges of biodiversity…………….…… 26 2.4 Agricultural biodiversity in the country…………………………….… 33 CHAPTER 3: DATA SOURCES AND DESCRIPTION……………….……… 39 3.1 Introduction ……………………………………………….….……… 39 3.2 Selecting appropriate sample size…………………………….……… 40 3.3 Selecting respondents for the survey…………………………………… 44 3.4 Field survey and its content…………………………………………… 47 3.5 Design choice experiment survey……………………………………… 49 vii CHAPTER 4: FARMERS’ VALUATION OF AGRICULTURAL BIODIVERSITY 57 4.1 Introduction……………………………………………………… … … 57 4.2 Literature review on valuation of agricultural biodiversity……….… … 60 4.3 Random utility models……………………………………………… … 64 4.4 Choice experiment method ………………………………………… … 70 4.5 Choice experiment design and model selection…………………… … 76 4.6 Empirical approach to choice experiments study……………….… … 82 4.7 Socio-economic profile of sample respondents…………………… … 91 4.8 Data cording and estimation procedure……………………………….… 94 4.9 Result of the conditional logit model (CLM)………………………….… 96 4.10 Result of the CLM including attributes and socioeconomic variables… 103 4.11 Result of the random parameter logit model………………………….… 108 4.12 Estimating welfare changes with changing attributes and their level… 110 4.13 Summary and key findings……………………………………………… 116 CHAPTER 5: FACTORS INFLUENCING FARMERS’ DEMAND FOR AGRICULTURAL BIODIVERSITY 119 5.1 Introduction ……………………………………………………… … 119 5.2 Literature review on demand for agricultural biodiversity………… 121 5.3 Derivation of demand for agricultural biodiversity……… ……….… 128 5.4 Empirical model specification and relevant variables……….…….… 135 5.5 Theoretical approaches for the relevant models………… …….….… 143 5.5.1 Poisson regression model…………………………………… 144 5.5.2 Negative binomial (NB2) regression model………………….… 148 5.5.3 Empirical tests for different count data models…………… … 152 5.6 Socio-economic characteristics of the households………………….… 155 5.7 Determinants of crops variety demand…….…………………….…… 158 5.8 Determinants of livestock variety demand.……………………….… 166 5.9 Summary and key findings …………………………………………… 169 viii CHAPTER 6: FARMERS’ PREFERENCES FOR DIFFERENT FARMING 173 SYSTEMS 6.1 Introduction……………………………………………………… … 173 6.2 Literature review on farmer’s preference for different farming systems 175 6.3 Methods of explaining farmer’s preferences………………………… 180 6.4 Factors influencing the selection of landrace cultivation……… …… 187 6.5 Factors influencing the selection of organic farming ………………… 190 6.6 Farmers’ demand for mix farming system…………………………… 194 6.7 Summary and key findings……………………………………….… 198 CHAPTER 7: AGRICULTURAL BIODIVERSITY AND FARM LEVEL 201 EFFICIENCY 7.1 Introduction…………………………………………………………… 201 7.2 Literature on agricultural biodiversity and farm level efficiency…… 204 7.3 Method of estimating farm level technical efficiency…………… … 209 7.4 Empirical model of estimation………………………………………… 215 7.5 Estimates for parameters of stochastic frontier production function… 220 7.6 Estimating marginal productivity and input elasticity………….… … 226 7.7 Variations of technical efficiency………………………….……… 228 7.8 Results of the inefficiency model…………………………………… 233 7.9 Summary and key findings………………………………………….… 238 CHAPTER 8: CONCLUSIONS AND POLICY IMPLICATIONS…………… 241 8.1 A summary of findings and discussion………………………….…… 241 8.2 Policy implications……………………………………………….…… 247 8.3 Limitations of the study and further research………………….……… 251 BIBLIOGRAPHY…………………… ……………………………………… 255 ix APPENDIX A (1): Defining agricultural biodiversity 288 APPENDIX A (2): TEV of agricultural biodiversity on small-scale farms 289 APPENDIX A (3): Defining TEV of agricultural biodiversity on farms……….… 290 APPENDIX B: Number of described species in the World………………….….… 291 APPENDIX C: Biodiversity wilderness areas in the world…………………….… 292 APPENDIX D (1): Topography in Sri Lanka………………………………….… 293 APPENDIX D (2): Major climatic zones in Sri Lanka………………………… 294 APPENDIX E: Protected areas under department of wildlife in Sri Lanka…… … 295 APPENDIX F: List of protected areas of Sri Lanka…………………………… 296 APPENDIX G: Map showing survey areas in Sri Lanka……………………… 297 APPENDIX H: Questionnaire used in the survey…………… ………….…….… 298 APPENDIX I(1): A sample choice set is given to the respondent…………….… 322 APPENDIX I(2): Description of 36 choice sets of the choice experiment……… 323 APPENDIX J: Descriptive statistics of the sample respondents.……………….… 324 APPENDIX K: Zero inflated Poisson / negative binomial regression model….… 327 APPENDIX L: MLE of parameters and point estimates of TE……………… … 330 APPENDIX M: Derivatives of elasticities using translog production function…… 335 APPENDIX N(1): List of crops varieties on small-scale farms…………………… 336 APPENDIX N(2): List of livestock breeds on small-scale farms……………….… 337 x ... organic farming ………………… 190 6.6 Farmers’ demand for mix farming system…………………………… 194 6.7 Summary and key findings……………………………………….… 198 CHAPTER 7: AGRICULTURAL BIODIVERSITY AND FARM LEVEL 201 EFFICIENCY. .. develop and use sustainably food and agricultural genetic resources including plant, animal and aquatic As mentioned above, agricultural biodiversity is eroding and resources available for conservation. .. membership of farm organization and land ownerships are significant and direct policy relevant variables in the inefficiency model The results of the study therefore have important policy implications