Comparative advantage of rice production in Sri Lanka with special reference to irrigation costs
2002
Kikuchi, M. | Barker, R. | Samad, M. | Weligamage, P.
By estimating the domestic resource cost, this paper examines the changes in the comparative advantage of rice production in Sri Lanka during the last three decades. Although dramatic increases in productivity because of the Green Revolution occurred in the 1970s, rice production in the major irrigation regime has had no comparative advantage throughout the period as long as the cost of new irrigation construction is taken into account. Even if the cost of new irrigation construction is treated as a sunk cost, rice production had no comparative advantage before the Green Revolution. Within one decade after the Green Revolution, rice production became highly socially advantageous relative to rice imports because of the irrigation infrastructure. However, the comparative advantages has been eroded since the country attained self-sufficiency in rice in the mid-1980s. At present, rice production is nearly on a par with the international rice market. It has lost the comparative advantage it once enjoyed in the 1980s but it has not fallen into an overt comparative disadvantage either. The major factor that has been pushing down the comparative advantage of rice production in recent years is the increase in the wage rate. Under the condition that it is difficult for Sri Lankan rice to find a market in world rice trade, the only option for maintaining domestic rice production that is economically sound is to increase labor productivity by pursuing economies of scale, which require significant increases in farm size. The rice sector in Sri Lanka had already entered the difficult stage of agricultural development and faces adjustment problems.
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