Layer Production in Ghana: A Cost Function Approach

Abstract

This study tries to find out why the Ghanaian Poultry Industry is unable to produce enough poultry chicken to meet the local market demand which has led to the large importation of frozen chicken for the period 1988-1999. It determines how responsiveness major poultry inputs such as vaccines, feed, labor and institutional credit are to price change and the economies of scale of layer production in the poultry industry. The study therefore estimates parameters of the input variables from the cost function and cost share equations, Allen Partial Elasticities of Substitution between inputs. These estimations are used in computing own price elasticities of demand for the poultry inputs, cross price elasticities of factor demand and scale elasticities in layer production over the period 1988-1999. The study also sought to determine what production function that best describes layer production in the Ghanaian Poultry Industry. The study's empirical econometric results indicate that a production function, which is characterized by non-homotheticity, non-homogeneity, non-unitary elasticities of substitutions, and non Cobb-Douglas model is required to adequately represent the production of layers by the Ghanaian Poultry Industry implying no restrictions on the production function. It is therefore a Constant Elasticity of Substitution production function. Inputs are found to be highly elastic which means that when their price rise the quantity demanded drastically falls. The relatively high price elasticities of the inputs indicate non-optimum production by poultry firms hence inability of meeting the market's demand. Layer production in the Poultry Industry exhibited both economies and diseconomies of scale over the study period 1988-1999. There was eight years of positive economies of scale with only four years of diseconomies of scales.