Investigating external effects of shrimp farming on rice farming in southern Thailand: a technical efficiency approach

Rice and shrimp farming are two important economic activities in rural southern Thailand that compete each other in land allocation leading to land use conflicts. Moreover, it can be observed that the conversion of rice fields to shrimp farms is already extended from coastal areas to the inlands. These conversions are making more area be saline which is essential condition for shrimp cultivation but deleterious for rice farming. We are looking at the unidirectional externalities originating from the conversion which brings the productivity of adjacent rice fields further down. This study attempts to quantify the external effects on rice yield and efficiency of rice farming by constructing three models. Model I, we assess the rice yield function by using the multiple linear regression while in Model II, we attempt to delineate the technical efficient frontier of rice farms by using an input oriented non-parametric approach, so called data envelopment analysis. Model III, we probe into the factors influencing technical efficiency scores using the Tobit regression. Database of the study is constituted by primary survey data from 120 rice farms in Songkhla province for the crop year 2004/2005. The 30 out of 120 sample farms have been affected by externality of shrimp farming. The empirical results of all three models show that shrimp farming externalities caused a production drop of 467–515 kg paddy rice per ha and significantly affect the technical efficiency of rice farms. The measures of internalizing this externality are discussed.