Priyanka Parvathi, Rattiya Suddeephong Lippe, and Hermann Waibel, Institute of Development and Agricultural Economics, Gottfried Wilhelm Leibniz Universität Hannover Presented at the ReSAKSS-Asia conference “Agriculture and Rural Transformation in Asia: Past Experiences and Future Opportunities”. An international conference jointly organized by ReSAKSS-Asia, IFPRI, TDRI, and TVSEP project of Leibniz Universit Hannover with support from USAID and Deutsche Forschungsgemeinschaft (DFG) at the Dusit Thani Hotel, Bangkok, Thailand December 12–14, 2017.

1. Infusing Growth: Rural Agricultural Investments and its
Impact on Agrarian Development in Northeast Thailand
Priyanka Parvathi, Rattiya Suddeephong Lippe and Hermann Waibel
Institute of Development and Agricultural Economics,
Gottfried Wilhelm Leibniz Universität Hannover
ReSAKSS-Asia Conference, Bangkok
December 12-13, 2017

2. Motivation
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [2]
Generally studies on structural changes in agriculture use country
level macro data of many years (Alvarez-Cuadrado & Poschke,2011; Ngai and
Pissarides,2007; Nunn & Qian; 2009; Gollin et al., 2005; Hansin & Prescott, 2002; Michaels et
al., 2012)
But is it possible to understand patterns of agricultural
transformation among smallholder farmers at the household level ?

3. Research Objectives
1. To model agricultural transformation of smallholder
farmers using panel household data
2. To examine whether investing in smallholder agriculture
structurally changes employment patterns of rural HHs
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [3]

4. Structural Change Measures
Labour Share in Agriculture:
No of members occupied in agriculture / Total available HH labour
(McArthur and McCord, 2017)
Labour Share in Off-farm:
No of members occupied in non-agriculture / Total available HH labour
(McArthur and McCord, 2017)
Mechanization:
Total variable machine costs incurred per hectare
Farm Size:
Rice area in hectares
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [4]

5. Study Area and Data
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [5]
• 3 Provinces:
Buri Ram, Nakhom Phanon &
Ubon Ratchathani
• 5 year Panel data from
approximately 2000 HHs :
2007, 2008, 2010, 2013 & 2016
• Total pooled sample
10, 364 HHs
• Rice Farmers :
7974 HHs

6. Changes in Investment Patterns
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [6]
HH investment in agriculture continues to decline
66%
54% 57% 52% 47%
34%
46% 43% 48% 53%
0%
20%
40%
60%
80%
100%
120%
2007 2008 2010 2013 2016
farm Other

7. Factors Affecting HH Agricultural
Investment
• Younger farmers with a larger farm size tend to invest more in agriculture
• Demographic shocks such as death of a main family member are likely to reduce
HH investment in agriculture
• Livestock farmers are more likely to invest
• If rural HHs have off-farm income, investment in farm tends to decline
• Memberships in socio-political organizations are more likely to increase
agricultural investment
• HH Assets are more likely to play a critical role in agricultural investment
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [7]

8. Relationship between Agricultural
Investment & Rice Yields
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [8]
1600
1700
1800
1900
2000
2100
2200
0
200
400
600
800
1000
1200
1400
2007 2008 2010 2013 2016
RiceYields
Investment(inPPPUSD)
Year
investments /ha rice yield
The more agricultural investment in the previous year, the higher
crop yields in the next year

9. Other Factors affecting Yields
• Rural farmers investing at least 3 times in the last 10 years are more likely to
witness yield increases in the current year.
• Farm size and yields have an inverse relationship
• Weather and Agricultural shocks like drought, floods, livestock diseases, crop
pests and irrigation problems decreases yields
• Economic shock like job-loss, business-failure, debt-burden makes rural HH to
shift farming from secondary to primary livelihood option
• Using fertilisers and mechanization improves yields
• Climate in term of adequate rainfall also affects rice yields
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [9]

10. Structural Change:
Investment & Labour Shares
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [10]
• Labor Share in Agriculture has reduced from 67% in 2007 to 57% in 2016
• Off-farm Labor share has increased from 33% in 2007 to 43% in 2016
• It takes a minimum of 2 years for investments to impact rural labor shares in
agriculture and off-farm activities
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0
200
400
600
800
1000
1200
1400
2007 2008 2010 2013 2016
LaborShare
Investments(inPPPUSD)
Year
investments /ha Agri Labour share Off-farm labor share

11. Structural Change:
Yields, Mechanization & Farm Size
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [11]
The more is the yield increase
in the previous year, the larger
is the mechanization in the
next year
The more is the yield increase
in the previous year, the larger
is the farm size in the next year
0
100
200
300
1600
1800
2000
2200
2007 2008 2010 2013 2016
machineexpenses
/ha(inPPPUSD)
Yields
Year
Yields machine Expenses
0
0.5
1
1.5
1600
1800
2000
2200
2007 2008 2010 2013 2016
Farmsize(inha)
Yields
Axis Title
Yields Farm Size

12. Conclusion
• Younger farmers with a larger farm size including livestock and
having memberships in socio-political organization invest more in
agriculture
• Climate change in terms of adequate rainfall also plays a role in
agrarian investments
• Smallholder households must at least invest thrice between 2007-
2016 to witness a rice yield increase in 2016.
• Investing in agriculture increases yield and with time structurally
changes agriculture and leads to development
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [12]

13. Policy Implications
BACKGROUND DATA RESULTS CONCLUSION POLICY RECOMMENDATION [13]
• Mechanisms to cope with shocks like insurance facilities
must be made affordable to rural households so that
investments in agriculture remain unaffected
• Rural agricultural loans for investment in farm machinery
need to be made more accessible
• Agricultural climate friendly inputs need to be made
affordable to increase yields and result in structural change.
• Area under irrigation need to be increased
• Thailand agricultural environment needs to be made more
investment friendly

14. Thank you for your Attention !
[14]