IMPACT OF CORRUPTION ON FARM PRODUCTION AND PROFIT

Abstract

By analyzing experiences of 210 rice farmers belonging to six villages of six different districts in Bangladesh this article estimates the impact of corruption on farm production and profit. Unlike existing literature corruption here is defined in broader term. Both explicit and implicit cost items are included while calculating the cost of corruption. Through estimating the marginal physical product of fertilizer, a relative impact of corruption on farm production is estimated. Then by hypothesizing different scenarios with different levels of corruption, changes in a farmer's benefit cost ratio is estimated. It has been observed that with reducing cost of corruption farmers observe higher benefit cost ratio and vice versa. Cost of corruption is found to be relatively higher in restricted input market situation and relatively lower when the market is more competitive. Thus our results are suggestive for competitive market policy to reduce corruption which will ultimately result in more farm production and profit.

Keywords

• Cost of corruption
• Bangladeshi farm households
• Marginal physical product
• Benefit cost ratio
• Scenario analysis