Farmer productivity analysis using individual data: simultaneous estimation of heterogeneity between farmers and elasticity of substitution among varieties of agricultural products.
A framework that incorporates product differentiation under monopolistic competition applies primarily to the manufacturing industry, and agriculture is often depicted in a simplified manner as a homogenous component without product differentiation. On the other hand, in the analysis of agricultural management and agricultural policy, attention is focused on certain farmers who have a strong entrepreneurial spirit and productivity and seek to increase value through product differentiation. Which is closer to reality? In this study, individual data from the "Farm Management Statistics Survey" is used to derive the total productivity of farmers and their distribution, and estimate the elasticity of substitution between varieties of agricultural goods. Results of the analysis confirmed that the heterogeneity among farmers was relatively small in horticulture-related fields. The degree of product differentiation tends to be relatively high for livestock farming. It was found that the elasticity of substitution among product varieties was at most about 3, which is not significantly different from the elasticity obtained for the manufacturing industry.