Scale and scope economies in small household rice farming in Vietnam

Abstract

The Vietnamese agricultural sector has experienced a dramatic structural change based on increased specialization in rice cultivation. However, small-scale rice-farmers have continued to grow multiple crops, especially in less developed provinces. While the literature advocates crop diversification for reasons of both economic and ecological sustainability, there lacks empirical evidence as to whether crop diversification brings efficiency and productivity gains to small farms. The present study is the first applications of the input-oriented stochastic distance function approach in estimating scale and scope economies using data of multi-crop farming households in Vietnam. We find strong evidence of product-specific economies of scale. Scope economies are also present for rice, vegetable, and other annual crop production. This suggests that crop diversification enhances efficiency and productivity. However, there still exists significant technical inefficiency in crop production, indicating opportunities to expand farm output at the existing level of inputs and technologies. More specifically, our empirical results indicate that it is desirable to expand vegetable and other annual crop production in mountainous areas while rice cultivation can be further expanded in delta and coastal regions.