The Effects of Price-support Programme on Farm Tenancy Patterns and Farm Profitability: Some Evidence from Malaysia

Translog normalised restricted profit function model is specified and estimated for the four rice granary areas, each administered by a local government body, namely, the MIP, the KIP, the NWSP, and the KEIP, in which the price-support programme has some noticeable effects on farm tenancy and farms profitability. So far, there have been no empirical studies that have used this methodological framework to analyse such economic phenomenon in Malaysia. This, in fact, is the main contribution of the present paper. From the estimated function, the shadow values of land and labour are computed, which in turn are used to elucidate the behaviour of rice farmers in Malaysia. Together, the estimated and computed results, to a large extent, are successful in explaining the observed changes in farm tenancy patterns and the way the farmers (comprised of owneroperator, owner-tenant, and tenant-farmer) are “economically” responding to the sum of profits generated from rice farming and, subsequently, from the programme. Further, given the price-support programme, the results also point to the fact that rice farming in Malaysia is as lucrative a job as any other sub-sector outside this, in particular unskilled urban workers and electronics workers, and thus this programme could be pursued further.