Agricutural Economics and Rural Development

kinh tế nông nghiệp và phát triển nông thôn

1. Chapter 2
ECONOMIC
FACTORS OF
PRODUCTION IN
AGRICULTURE
MA. Mai Le Thuy Van

2. 10/27/2023 Faculty of Economics - VNU HCM 2
1. Land
2. Labor
3. Technology progress
*Exercises
**Reading: territory possession
Content
10/27/2023

3. 1. Land
Land has been defined by various scholars, as:
•“By land is meant not merely land in the strict sense of the word, but
whole of the materials and forces which nature gives freely for man’s
aid in land, water, in air and light and heat.”
PROF. MARSHALL
•“Land is a specific factor or that it is the specific element in a factor or
again that it is the specific aspect of a thing.”
PROF. f. K. MEHTA

4. 1.1 Characteristics of Land
Land possesses the following characteristics:
1.Free gift of nature
2.Fixed quantity
3.Land is permanent
4.Land is a primary factor of production
5.Land is a passive factor of production
6.Land is immovable
7.Land has some original indestructible powers
8.Land differs in fertility
9.Supply of land is inelastic
10.Land has many uses

5. 1.1 Characteristics of Land (cont.)
•Thesecharacteristicsfall into two general categories:Economicand
Physical. Thefour economic characteristics of landthat affect its
value as a product in the marketplace are Scarcity, Improvements,
Permanence of Investment, and Location or Area Preference.

6. 1.2 Land classification
Thus, we can say, land includes:
•i. Surface of the earth like plains, plateaus, mountains, etc.
•ii. Sea, rivers, ponds, etc.
•iii. Air, light, etc.
•iv. Oil, coal, natural gas, etc.
•v. Silver, gold and other metals and minerals.
Source: http://www.economicsdiscussion.net/land-reforms-2/land-
meaning-characteristics-and-factors-affecting-it/18441

7. 1.2 Land classification
Depending on the use purpose, land shall be classified into the following categories:
•1. Agricultural land category, including:
(a) Land for cultivation of annual crops, including paddy land and land for cultivation of other annual crops;
(b) Land for cultivation of perennial trees;
(c) Production forest land;
(d) Protective forest land;
(e) Special-use forest land;
(f) Aquaculture land;
(g) salt-production land;
(h) Other agricultural land as stipulated by the Government.
•2.Non-agricultural land
•3. Unused land category, including land of types for which land use purposes have not been
determined yet.
Source: VIETNAM Land Law 2013.

8. 1.3 Indicators use for assessing land.
1.3.1 The size of agricultural land.
FAO: Average agricultural land size=sum of agricultural land area/
population.
WB and IMF: Average agricultural land size=sum of agricultural land
area/ agricultural population.
1.3.2 The level of utilizing agricultural land = Total of cultivating
acreage/ Total of land size.
Example: A farm has 10 hectare of agriculture land in which 5 ha can
grow 3 crops of rice/ year, 3 ha of rice crops/ year, 2ha of 1crop.
Compute the level of utilizing agricultural land.

9. 1.3 Assessing land (cont.)
1.3.3. Soil/ Crop productivity
1.3.3.1. Soil productivity index: the number of agro-products have
been yielded from 1 ha per year.
1.3.3.2 Crop productivity index: the number of agro-products have
been yielded from 1 ha per crop.

10. 1.3 Indicators use for assessing land (cont.)
The second example show that, we can not calculate the efficiency of using
land by simple formula like 1.3.2. So we should take into account the
following formula:
In which:
•TVP: Total Values of Product (measured by unit of acreage)
•Qi: Quantity of product i
•P: Price of product I
•A: The acreage of land

=
A
QiPi
TVP
n
1

11. 1.3 Assessing land (cont.)
1.3.4. Profit
1.3.4.1. Profit (Pr) = TVP – TC
With TC - total cost.
→ Economic profit.
1.3.4.2. Family labour income (FLI) = Pr + IOC
With: IOC - Implicit opportunity cost
→ Accounting profit

12. 1.3 Indicators use for assessing land (cont.)
•Some note: Total Cost (TC) includes:
1.Intermediate cost: material cost and service cost
2.Labor cost: cost for working day, including opportunity cost for
labor of family. This is an implicit cost. For example: The hired labor
is 90 working days, family labor is 60 working days. So 60 working
days is the opportunity cost of family labor income.
3.Depreciation of fixed assets: personal assets, households investing
in production (warehouses, pumps, other machines ...).

13. 1.3 Indicators use for assessing land (cont.)
•Profit Cost Ratio:
•Benefit Cost Ratio:
��??????=
�??????
??????�
×100%
��??????=
??????????????????
??????�−��
×100%

14. 1.3 Indicators use for assessing land (cont.)
Applied exercise: Analysis the efficiency of 2 following production plan.
Some costs and TVP 02 rice crop /year/ 1ha
(Unit: 1.000 VND)
01 plant crop/ year/ 1ha
(Unit: 1.000 VND)
Employed labor 2.466,8 1443
Family labor 2.000 1.000
Pesticides 995,83 1.665
Seeds 783,41 2.750
Irrigation fees 200,15 200
Fuel 48 68
Other costs 23 800
Agricultural taxes 200 200
TVP 15.614,91 22.314

15. 1.4 Factors affecting productivity of land
•Qualities of land
•Means of irrigation
•Situation land
•Proper use of land
•Improvements on land
•Improved methods of cultivation
•Trained labour
•Ownership of land
•Government policy

16. 1.5 Practical setting:
1.5.1. The status of Agricultural land of Vietnam
The status of using land (until 01/01/2013)
(*)
Thousand ha
Total of acreage Delivery
Transferred and
Lended
Land lended to
manage
Unit %
Total 33097.2 25227.8 7869.4
Agricultural land 26371.5 79.7 23041.0 3330.5
Agricultural land for production 10210.8 38.7 10093.4 117.4
Planting annual crops 6422.8 62.9 6372.6 50.2
Rice cultivation 4097.1 63.8 4083.2 13.9
Pastoral land for raising livestock 42.7 0.7 32.2 10.5
Land for planting other annual crops 2283.0 35.5 2257.2 25.8
Planting perennial crops 3788.0 37.1 3720.8 67.2
Forest land 15405.8 58.4 12204.4 3201.4
Production forest land 7391.8 48.0 6004.7 1387.1
Protective forest land 5851.8 38.0 4183.3 1668.5
Specialized use forest land 2162.2 14.0 2016.4 145.8
Land for aquaculture 710.0 2.7 699.1 10.9
Land for salt production 17.9 0.1 17.5 0.4
Other agricultural land 27.0 0.1 26.6 0.4
Non-agricultural land 3777.4 11.4 1771.3 2006.1
Unused land 2948.3 8.9 415.5 2532.8

17. 1.5.2. Vietnam’s land policy
•Student read Vietnamese land on law and give opinions about the
articles related to the agricultural land under the instruction of
lecturer.
•Read the article 129.

18. Discussion
•How does land policy affect rural development and poverty
reduction?
•What is the basis for the extension of the land limit and land use
term?
•What are the advancements in Vietnam's land policy in 2013?

19. 2. Agricultural workers.
2.1 Concepts and classification
Labor isa force of production that refers to the work people do to produce goods and services. It includes all the physical and mental
efforts that go into the production of goods and services
Classification: The four major types of labor are professional, semi-skilled, skilled, and unskilled labor.
when it comes to the labor forces, there something need to examine as follow:
•Quantity of labors
•Quality of labors
•Factors affecting to the quality of labors
2.2 features of agricultural workers
Agriculture workers are the same features as other sectors but some of them are different
•Agricultural workers are seasonal
•The number of agricultural workers follows a decreasing tendency over years. The level of volatility depends on the growth of
other economic sectors. (Review the formula to assess the level of labor mobility in Vietnam)
•The productivities fluctuated in the direction of increasing gradually with time corresponding to the number of declining
agricultural workers.

20. Table 1: Share of agricultural workers in total labor
in ASEAN
unit (%)
1975 1995 Levelof fluctuation
Bangladesh 78.1 54.4 23.7
Hong Kong 2.6 0.8 1.8
India 70.3 60.9 9.4
Indonesia 66.1 52.5 13.6
Malaysia 49.7 22.2 27.5
Korea 40 19 21
Philippines 64.5 52.8 11.7
Thailand 70.7 62 8.7
Vietnam 1991 2010
72,7 48.7 24

21. Relationship between economic growth rate, agricultural labor growth
rate and agricultural productivities growth rate (1)
Some denotes:
▪ya: Agricultural productivities.
▪La: Agricultural labor
▪Y
0: Agricultural GDP at time 0
▪Y
t: Agricultural GDP at time t
Solve the equation:
Y
t – Y
0= y
t.L
t - y
0.L
0
Y
t – Y
0= SOL
tBy
t – SOL
0Ay
0
➔Y
t – Y
0= S
II + S
III + S
IV
➔Y
t – Y
0= y
0.L + y.L
0 +yL
L
t
III IV
III
L
y
L
0
0
yt
y
0
A
B

22. Relationship between economic growth rate, agricultural labor
growth rate and agricultural productivities growth rate. (2)
R
Y = R
L + R
y
R
y= R
Y–R
L
•R
y=constant, the minus symbol show the inverse proportional relationship
between R
L and R
Y.
•From the formula, it is concluded that if a nation do want to increase the
rate of labor productivity, it must reduce the growth rate of labor.Yo
LyyLLy
Yo
YoYt
00 ++
=
− 0000
0
00
0
Ly
Ly
Ly
yL
Ly
Ly
Yo
YoYt 
+

+

=
− 000 y
y
L
L
Y
Y 
+

=


23. Economists' views on agricultural productivity
•Lewis (1954) said that there is an excess of labor in the agricultural
sector, which makes the state budget for agricultural production low.
The shift of surplus labor from the agricultural sector to the industrial
sector will affect the increase of labor productivity and increase the
output of industrial sector. Consequently, the economic growth rate is
improved.
•Todaro (1969) identified the process of developing agriculture to
create economic restructuring from the standalone agriculture to
diversification and specialization according to comparative advantage.
Corresponding is the change in growth in agriculture by changing the
mode of development in width to the method of deep development
on the basis of increasing labor productivity.

24. Economists' views on agricultural productivity
•According to Park (1992), in the development stage, agricultural
growth is due to the improvement of the state budget and itself
determines the income of farmers.
→ In conclusion, economic theories suggest that agricultural labor
productivity affects economic growth rate, changes in economic
structure and income of agricultural workers.

25. 2.3 Indicators
2.3.1 In terms of quantity
a. The size of labor: the number of agricultural labor, percentage of
agricultural labor in total labor force.
b. Ratio:
In which:
•l: the actual number of employees participating in work
•L: number of labor capable of working
•d: the actual number of working days for an employee
•D: number of possible working days for an employee
•h: the actual number of working hours for an employee
•H: the possible number of working hours for an employee %100=
H
h
D
d
L
l
Rt %100% =
L
l
T

26. c. Determining the turning point of labor mobility
•In order to predict the time at which the growth rate of agricultural
labor is zero (gla = 0), in other words, the change in agricultural labor
is zero.
•We have the formula: L
T = L
N + L
A
• LT: Total social labor
• LA: number of workers in the agricultural sector
• LN: number of non-agricultural workers
•When the parentheses occur, L
A = 0
➔L
T = L
N

27. Some denotes
•L
T, n : Social workers at time n
• L
T, n – 1 : Social workers at time n - 1
• L
T, 0 : Social workers at the time of origin
• L
N, n : Non-agricultural workers at time n
• L
N, n – 1 : Non-agricultural workers at time n - 1
• L
N, 0 : Non-agricultural workers at time 0.
• g
LT : Average growth rate of the labor force
• g
LN : Average growth rate of non-agricultural workers
• g
LA : Average growth rate of agricultural workers

28. c. Determining the turning point of labor mobility
•Let n be the time when the turning point of labor mobility occurs.
•L
T, n – L
T, n -1 = L
N,n – L
N,n – 1
• L
T,0(1+g
LT)
n
– L
T,0(1+g
LT)
n-1
= L
N,0(1+g
LN)
n
– L
N,0(1+g
LN)
n-1
➔LnA = LnB
n
n
LT
LN
LT
LN
LN
LT
0N
0T
g1
g1
g1
g1
g
g
L
L








+
+
=
+
+

,
,
??????=
LnA
LnB

29. Active learning 2
•Labor indicators of a province as follows:
•Total social labor force in 2008: 57,141,000 people
•Non-agricultural labor force: 19,188,000 people
•Annual growth rate of total labor force: 2%
•Annual growth rate of non-agricultural labor: 6%
•Questions: Please indicate when will the turning point occur? At that
year, How many labor work in agricultural field?

30. 2.3.2 In terms of quality
2.3.2.1 Factors affecting to quality of labor
•Health status
•Educational level
•Training rate of professional qualifications
•Experience
•Mentality
•Labor consciousness ...

31. 2.3.2.2 Agricultural labor productivity.
Agricultural labor productivity is the number of products or services
created by agricultural workers in a period of time (usually 1 year). This
is an important indicator, reflecting the efficiency and level of
agriculture.
• La: the number of workers in agriculture
• Ya: The value of the total agricultural output (using a fixed price) or
the GDP of the agricultural sector (Ya) in dollars..a
a
a
L
Y
y=

32. 2.3.2.2 Agricultural labor productivity (cont.)
•The formula for agricultural labor productivity can be decomposed
as follows:
•In which:
oLand productivity:
oThe ratio of land to labor (land - labor coefficient)a
a
a
a
a
L
A
A
Y
A
A
L
Y
y == A
Y
a aL
A

33. How to calculate growth rate (growth rate of land
productivity and growth rate of land - labor ratio)?
YearY
a L
a A Y/AA/L G Y/A G A/L
1980a1 a2 a3 a4a5 100 100
1981b1 b2 b3 b4b5 b4/a4.100%b5/a5.100%
1982c1 c2 c3 c4c5 c4/a4.100%c5/a5.100%
… d1 d2 d3 d4d5 d4/a4.100%d5/a5.100%

34. Trends in labor productivity shift
At point A
Agricultural labor
productivity
depends mainly on
the ratio of land to
labor when the land
is wide and sparsely
populated. At that
time, the increase in
productivity was
mainly due to the
increase in
agricultural land
area. (extensive
method)
From A-B
Iassociated with
population growth,
limited of land size,
increased labor
productivity is due to
the increase of
land productivity
(This is the period of
green revolution,
seed investment,
fertilizer ... also known
as biological revolution
quickly increases the
total value of products /
1 unit area). The method
of developing agriculture
is intensive, expanding
in depth.
From B-C
the increase in
agricultural labor
productivity is
affected by
increased land
productivity and
increased land-
labor index. The
increase in land
productivity is due to
the continued
application of the
achievements of the
Green Revolution.
The land-labor index
increased due to
labor shifting to non-
agriculture.
35
G A/L
G Y/A
A
B
C
Starting point: A

35. 2.4 Vietnam’s agricultural labor issues and
solution
Table 2: Economic structure in the period 1991 - 2009
Proportion of GDP (%) Proportion in total labor (%)
Year AgricultureIndustryServiceAgricultureNon-agriculture
1991 39.0 23.137.9 72.6 27.4
1995 26.2 29.943.8 71.7 28.3
2009 17.1 41.641.4 51.9 48.1
Source: General Statistic officeand calculations by Associate Prof. Dr. Dinh Phi Ho
(GDP by 1994 price)

36. 2.4 Vietnam’s agricultural labor issues and
solution
Table 3: Labor productivity of countries in 2005
Country
Productivity
(USD) Comparision (%)
Others Vietnam
United States 77,346 100 1.60
Singapore 52,426 100 2.36
Malaysia 11,300 100 10.95
Thailand 4,305 100 28.73
Philippines 2,807 100 44.07
Indonesia 1,952 100 63.37
Vietnam 1,237
10/27/2023 37

37. •https://www.gso.gov.vn/Default.aspx?tabid=382&idmid=&ItemID=19
315
•http://baochinhphu.vn/Kinh-te/Toan-canh-buc-tranh-nang-suat-lao-
dong-Viet-Nam/372323.vgp

38. 3. Technology
3.1 Concept
Science is a system of human knowledge and understanding of the laws of
movement and objective development of nature, society and thought.
•Technology is a collection of insights into methods aimed at natural
rehabilitation to serve human needs.
•Agricultural Sciences is the knowledge system of natural, economic, and
social laws in the field of agricultural production.
• Agricultural technology is a collection of tools and methods used to
influence resources to improve the capacity of agricultural production.
•Thus, science and technology in agriculture are closely linked. The function
of science is to discover rules while the function of technology is to apply
the rules to practical agricultural production.

39. 3. Technology
3.1 Concept
•Science is a common property, can be widely available while
technology is a commodity associated with ownership and has a
corresponding price.
•In the agricultural production and research activities, people are
increasingly more aware of land, water, climate, weather,
characteristics and development rules of plants and animals; laws to
mobilize interactions between the elements of agricultural
production. On that basis, people find new means, new ways, new
processes to increase productivity, quality and high efficiency. That
process is the process of applying scientific and technological
advances to agriculture

40. 3. Technology
3.1 Concept
•Progress in science and technology in agriculture is based on 2 bases:
• Development of agricultural science knowledge
• Development of agricultural industries for agricultural production
•Scientific and technological progress impacts on agricultural
production in many ways, but the most common is through the
process of mechanization, irrigation, chemical chemistry,
electrification and application of bio-technology achievements. learn.
Therefore, studying the effects of science and technology on
agricultural production is also considering these contents.

41. 3.2 The role of science and technology
•Is a decisive factor in improving the quality of agro products and
thereby increasing competitiveness.
• Is an important factor in shortening the cycle of agricultural
production.
• Is a determinant of the process of reducing wastage and increasing
labor productivity.

42. 3.3 Features of advanced science and
technological innovation in agricultural sector.
•Advances in science and technology in agriculture must be based on advances in
biology, ecology, biotechnology. Out of which ecology comes into play. Other
scientific and technological advances must meet the requirements of scientific
progress - biotechnology and ecology.
• Research and application of scientific and technological advances in agriculture
are highly regional and local.
•Diversity of different types of technology in agriculture. There are 2 types of
technology:
o Intensive technology to improve biological productivity and economic
productivity per unit area.
o Mechanization and automation technology, mainly aimed at improving work
efficiency, saving labor time in each stage, reducing labor costs.
• Balanced synchronization in the development of agricultural science and
technology progress.

43. 3.4 Basic contents of applying science and
technology to production.
•3.4.1 Irrigation is the conquest and use of water for agricultural production.
•3.4.2 Agricultural mechanization is a revolution in agricultural production
tools to turn manual workers into mechanized or more specific ones, rather
than the process of replacing human, animal power and tools. handmade
by motorized means.
•3.4.3 Chemistry is the use of agricultural chemicals, pesticides, growth
stimulants ... produced by the chemical industry.
•3.4.4 Agricultural and rural electrification is to bring electricity into
widespread agricultural production and rural life.
•3.4.5 Agricultural biochemistry is the process of studying and applying the
achievements in biological science and ecological science to agriculture in
order to improve productivity, quality and protect the ecological
environment.

44. 3.5 Innovation of science and technology in
agriculture.
3.5.1 Concepts
• The technical efficiency is to get the maximum output with a certain
amount of input.
• Allocative efficiency is to use factors in proportion to achieve
maximum profit with the prices of given inputs.
•Economic efficiency = Technical efficiency x Allocative efficiency

45. Model
In the above model we can analyze how to
calculate the overall economic efficiency
as follows:
In Which:
OC/OD: Indicating the technical efficiency
of farm D means that farm D can reduce
the use of inputs but still ensure the same
amount of output.
OR/OC: Express the allocative efficiency
or the difference between the minimum
cost point and the costs incurred at point C.
46
• A
•
•
• C
• D
B
R OC
OR
OD
OC
OD
OR
=
K ($)
L
Iso quant
O

46. Note:
When innovating science - production function technology will shift in
the following way:
• Create more products with a number of inputs as before.
• Generating a number of outputs like before but using fewer
production factors.

47. Technological innovation and total
product curve
❑ The same amount of F0
fertilizer can produce the
amount of product B greater
than the amount of product
A.
❑ Same amount of product A
but using fertilizer F1 smaller
than F0
10/27/2023 48
Total products
Fertilizer
O F
0
A
B
TP
1
TP
2
F
1

48. Innovating technology and Iso quant
The new technology level
can produce the same
amount of product but
with less input volume.
That is, the contour Q0
instead of the contour line
Q1 moves towards the
origin
10/27/2023 49
Capital ($)
Labor (hour)
O
Q
0
Q
1

49. Technological innovation and PPF
Due to the use of new
varieties, the volume of
sweet potatoes increased
with the same input.
10/27/2023 50
Sweet potatoes
Peanuts
O
PPF
0
PPF
1
A
B

50. 3.5.2 Distinguishing the type of technology innovation
Technological innovation in style
go straight
Prices of inputs are unchanged
The amount of capital on the vertical
axis, the number of labor on the
horizontal axis.
New technology can save labor and
capital at the same rate
The optimal combination rate remains
constant
Technological innovation in style
curve
Prices of inputs are unchanged
The amount of capital on the vertical
axis, the number of labor on the
horizontal axis.
Assuming new technology, using
sophisticated tractors increases the
marginal productivity of capital.
The optimal combination rate increases
5110/27/2023

51. Technological innovation in style
go straight
CAPITAL AND LABOR are
both saved in the same
proportion compared to the
previous use
10/27/2023 52
• A
•
B
Vốn ($)
Ngày công
O 0






L
K
Q
0
Q
0’

52. ĐỔI MỚI CÔNG NGHỆ ĐI XIÊN
Suppose the marginal product
of capital increases due to the
use of a more sophisticated
tractor. If the price is constant,
the optimal ratio between
machine and labor increases
we call this TECHNOLOGY
INNOVATION BY SAVING
LABOR
10/27/2023 53
• A •
B
Vốn ($)
Ngày công
O 0






L
K
Q
0
Q
0’ 1






L
K

53. DISCUSSION:
Technology unemployment
1.What is the meaning of the above phrase?
2.What does the phrase refer to?
3.How solve?
4.What is the relationship between terms: technological innovation,
productivity, GDP, employment and income?
5.The groups themselves find a post on the net related to this
Vietnamese or English article or working paper and re-present it.
Then the group commented on the article and received discussion
from other groups.
10/27/2023 54

54. Thank you for your attention and hard work
so far