A Discriminant Analysis Of Factors Affecting Productivity And Profitability Of Smallholder Households

Abstract

In neoclassical economics institutions are considered to be givens or mere constants in agricultural production and development. There is now a new field of economics that argues that institutions are not givens in agricultural production but have a role to play in determining the agricultural performance of households. This study develops a framework for analyzing the relationship between institutions, agricultural performance, household characteristics and other neo-classical variables. The study investigates the factors that affect the productivity and profitability of households using data collected from dry-land and irrigation areas. Discriminant analysis was used to identify the institutional and non-institutional factors that have an impact on the profitability and productivity of households. It emerged from this study that the agriculture performance of households is determined by a wide variety of factors that include household characteristics, institutional factors, resource endowment factors and crop production factors. The results of this study are consistent with the emerging literature that institutions are not constants in production. The study also contributes to the growing body of evidence that institutions do have an impact on agricultural production of households.