An intra-farm study of production factors and productivity for shrimp farms in Bangladesh: an index approach

The production characteristics of shrimp farming in Bangladesh are reported based on a panel of farms for the period 1998 to 2002. The data allow for a profit decomposition based on the Törnqvist index, where differences in relative profits can be explained by differences in productivity, prices, and pond size. The indices indicate that pond size is the most important factor in determining profitability and that the largest farms are the most profitable. However, productivity measured as profit per hectare is only weakly positively correlated with pond size. In fact, the smallest ponds rely more on productivity in generating profit relative to the most profitable farm. These results indicate that small farms are disadvantaged not because they lack the skills to manage, but because the farms are too small. The challenge for Bangladeshi policy makers is to devise methods and procedures to allow small farmers to expand pond size.