Modelling the cost structure of small scale export oriented vegetable farms in the North and South Dayi Districts

Abstract

Using the seemingly unrelated regression technique, we estimated the cost function, represented by the coefficients of cost share equations for fertilizer, fuel, agrochemicals and labour, is estimated for the vegetable export farms in the North and South Dayi Districts in the Volta Region of Ghana from cross-sectional time series data,. The elasticities of factor substitution and demand are estimated. There is a high and significant degree of substitution between agrochemicals and fertilizer (2.1576). The estimated cross price demand elasticities show that agrochemical and fertilizer are substitutes. One percent decrease (increase) in the price of fertilizer (agrochemical) will, significantly lead to 0,3232 (0.4268) percent decrease (increase) in the demand for agrochemical (fertilizer). These results mean that the effect of policy action on the price of one of these two inputs will also effect changes in the demand of the other input. The estimated elasticities of substitution and factor demand show that labour is a complementary, though insignificant, input for fertilizer, fuel and agrochemicals. Implication for managing fertilizer, fuel and agrochemicals and emerging farm businesses are discussed.