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A Measure of Economic Rationality in the Smallholder Tea Sub-Sector in Kenya
Abstract
It was hypothesized that the extend of rationality in allocation of resources in the smallholder tea enterprise is relatively low. Hence, smallholder tea productivity has remained relatively lower than in the estate sub-sector, high yielding clones and useful agronomic recommendations extended in the smallholder sub-sector notwithstanding. To determine \"the extend of economic rationality\", \"A Test of Economic Rationality Model\" was used whereby, the index of economic rationality, ρ is the product moment coefficient of correlation between log (total variable costs-excluding labour costs) and log (labour-in mandays) for each tea district and region. The results showed that the product moment coefficient of correlation, ρ was:- 0.647 in Kirinyaga District, 0.651 in Nyambene District, 0.793 in Nandi District, 0.743 in Nyamira District, 0.595 in East Rift Valley Region, 0.752 in West Rift Valley Region and 0.674 for all farms surveyed. It was noted that the lowest value of ρ was 0.595 in East Rift Valley Region. It means that at least 59 percent of the variance in the logs of both inputs is due to the variation in the systematic profit-maximizing component of these inputs. The balance of 41 percent is the maximum that could be occasioned not only by poor technology and/or knowledge gaps but also by errors in the model and noise in the universe. The null hypothesis was rejected in favour of the alternative hypothesis. The conclusion is that smallholder tea farmers in Kenya seem to be quite price efficient in tea production.
Journal of Agriculture, Science and Technology Vol.3(1) 2001: 10-21
