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AGRARIAN REFORM COOPERATIVES
IN HONDURAS

MICHAEL J. MARTIN

A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

UNIVERSITY OF FLORIDA

1996

Michael J. Martin

This dissertation is dedicated to my Honduran friends who were patient and kind enough
to share their rich lives and culture with me. It is also dedicated to my parents, whose
unquestionable love and concern turned a Central American sojourn into a larger home.

ACKNOWLEDGMENTS

This dissertation is the product of the collaboration and assistance among many friends
in Honduras and the University of Florida. I am especially grateful to my Chair, Professor
Timothy Taylor, who generously contributed his guidance and support throughout the entire
research process. The door to his abundant professional faculties was always open. I am also
very grateful to my Cochair, Professor Uma Leie, whose amiably shared insights in the realm
of international development have been invaluable in broadening my perspectives. Professor
Chris Andrew, in whose class I presented the embryonic stages of this dissertation and who
helped in the conceptualization and identification of the research problem, deserves much
gratitude, as does Professor James Scale for sharing his rich technical skills and philosophizing
on techniques and context. I extend a special appreciation to University of Florida President John
V. Lombardi, who took time out of his busy schedule to serve on the committee.

My sincere thanks go to Professor Keith Andrews, Director of the Pan-American School
of Agriculture in Honduras, for providing fieldwork support and guidance. All the extension
agents and staff at Zamorano have my gratitude for their assistance and friendship. I am indebted
to the enumerators for turning tedium into fun and for relating so successfully with farmers. The
farmers who participated in the survey merit particular appreciation for their time and trust.

I am thankful for my brothers, Jim, Dan and Steve who provided invaluable
encouragement that reminded me of the benefits of cooperation. I am also indebted to friends
here in Gainesville who provided moral support when it was crucially needed.

TABLE OF CONTENTS

page

ACKNOWLEDGMENTS iv

LIST OF TABLES viii

LIST OF FIGURES x

ABSTRACT xi

CHAPTERS

1 INTRODUCTION 1

Objectives 4

The Arrangement of the Dissertation 5

2 EVOLUTION OF FORCES THAT INSTITUTED HONDURAN AGRARIAN

REFORM COOPERATIVES 7

The Pre-Colonial Period 8

Agriculture 8

Land Tenure and Labor 9

The Colonial Period 10

Agriculture 10

Land Tenure and Labor 11

Independence 14

Honduran Independence 15

Honduran Land Tenure 1821 - 1898 17

Honduran Land Tenure: 1898 - 1940 19

Campesino Unions and the Design of HARCs during the Cold War 20

Cuba and Bananas 20

The Land Reform Law of 1962 22

Decretos Leyes (Legal Decrees) Nos. 8 ife 170 25

Agrarian Reform Amid Political Tumult: 1975 - 1988 28

The Land Titling Program 33

Collectivization 34

Incentives in Collectives 34

Structural Contradictions of Collectives in Agrarian Reforms 36

HARC Collectivization: Underlying Forces 38

3 INITIATING EFFICIENCY GAINS: TECHNOLOGY ADOPTION 40

Introduction 40

Determinants of Technology Adoption 41

Methodology 43

Data and Model Specification 45

Results 47

Summary 50

4 TECHNICAL AND ALLOCATIVE EFFICIENCY: COLLECTIVE VS

INDIVIDUAL 51

Productive Efficiency 54

Technical Efficiency 56

Allocative Efficiency 59

Nonparametric Frontiers 62

Parametric Frontiers 65

Technical Efficiency vis k vis Technology Adoption 69

The HARC Stochastic Frontier 71

Results 76

Technical and Allocative Efficiencies 80

Summary 87

5 TRADITIONAL AND ADVANCED TECHNOLOGY: A COMPARISON OF

BEANS AND MAIZE 89

Beans: A Traditional Crop 90

General Efficiency Comparisons: Maize and Beans 98

Summary 102

6 THE INFLUENCE OF HUMAN AND SOCIAL CAPITAL ON TECHNICAL AND

ALLOCATIVE EFFICIENCY 103

Introduction 103

Theoretical Underpinnings of Human Capital 104

Empirical Applications of Human Capital Components 105

Education 106

Training and experience 108

Health 109

Religion 110

Social Capital Ill

Empirical Model and Data 113

Maize 114

Beans 123

Training and Education: Complements or Substitutes? 131

Summary 143

7 THE NATURE OF HONDURAN AGRARIAN REFORM COOPERATIVES AS

PRIVATE ENTERPRISES 145

Introduction 146

The problem 147

Cooperative Enterprises and the New Institutional Economics 148

Why Firms Exist 149

Cooperatives in the NIE 150

Contracts 151

Contracts Related to HARC Basic Grain Production 152

The Standard Administrative Chart 153

Transaction Association by Activity 156

Internal Contracts: The Black Box of the Firm 158

Labor-labor contracts 159

Administration-labor contracts 159

External Contracts: Association with Support Agencies 160

Campesino unionizing 161

Land tenure 163

Technical assistance 163

Credit 164

Marketing 165

Vigilance Committees 166

The Design of Efficient Institutions 167

Credible Commitments 168

Non-credible Commitments 168

An Empirical Observation: The Guanchfas Cooperative 169

Summary 171

8 SUMMARY AND RECOMMENDATIONS 175

Design of the Analysis 175

Summary of the Results 176

Recommendations 178

Future Research 179

The Potential Role Private Capital 179

The Potential Role of NGOs 180

APPENDICES

I DATA AND STUDY AREA 181

II FIELD SURVEY 188

III REFERENCE LIST 199

IV BIOGRAPHICAL SKETCH 211

vii

LIST OF TABLES

Table page

2.1 Distribution of Farmland by Farm Size in Honduras, 1974 29

3.1 IPM Adoption: Pre-infestation maximum likelihood estimates 49

4. 1 Average function: Maize ordinary least squares regression 77

4.2 Frontier function: Maize maximum likelihood estimates half normal distribution ... 78

4.3 Frontier function: Maize maximum likelihood estimates exponential distribution ... 79

4.4 Technical and allocative efficiencies for maize half normal truncated distribution . . 81

4.5 Technical and allocative efficiencies for maize exponential truncated distribution . . 83

4.6 Differences in efficiency averages between collective and individual parcels 86

5.1 Average function: Beans ordinary least squares regression 93

5.2 Frontier function: Beans maximum likelihood estimates half normal distribution ... 94

5.3 Frontier function: Beans maximum likelihood estimates exponential distribution ... 95

5.4 Technical and allocative efficiencies: Beans half normal and exponential truncated

distribution 96

5.5 Differences in allocative efficiency between an imputed standard wage and zero

wage for unpaid labor 98

5.6 Average Technical and Allocative Efficiencies for Maize and Beans 99

5.7 Coefficients of variation 101

6.1 Personal and household characteristics - maize 117

6.2 Physical capital - maize 119

6.3 Social capital - maize 120

viii

6.4 Extension methods - maize 121

6.5 Experience - maize 122

6.6 Personal and household characteristics - beans 125

6.7 Physical capital - beans 127

6.8 Social capital - beans 128

6.9 Extension - beans 129

6.10 Experience methods - beans 130

6.11 Lecture only - maize 133

6.12 Publication only - maize 134

6.13 Lecture and publication - maize 135

6.14 Lecture and visual aids - maize 136

6.15 Control group - maize 137

6.16 Lecture only - beans 138

6.17 Publication only - beans 139

6.18 Lecture and publication - beans 140

6.19 Lecture and visual aids - beans 141

6.20 Control group - beans 142

ALL Asentamientos by name, membership and land access 184

AL2 Comparison of sample averages with national averages 185

LIST OF FIGURES

Figure page
2.1 Adjudicated land: 1962 - 85 26

4. 1 Input Requirement Set 57

4.2 Farrell Technical and Allocative Efficiency 60

7.1 Administration chart 155

7.2 Activity chart 157

Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy

AGRARIAN REFORM COOPERATIVES
IN HONDURAS

Michael J. Martin
December, 1996

Chairperson: Timothy G. Taylor

Major Department: Food and Resource Economics

Honduran agrarian reform cooperatives (HARCs) perform poorly as economic
enterprises. HARCs' inefficiency is generally attributed to their collective mode of production
and to internal mismanagement. In this study, a stochastic frontier production function is
estimated with cross-sectional maize production data on over 400 individual producers and 28
HARCs. "Debreu-Farrell" efficiency estimates indicate that collective production is more
technically and allocatively efficient than individual production.

Frontier estimates on individual bean production data show much higher allocative
efficiencies than those of maize. Input requirements for maize are more varied and advanced than
those of traditional bean production and require adjustments in input mixes. That farmers are
not optimally adjusting input mixes is attributed to ineffective input distribution systems.

The most prominent single factor influencing HARC efficiency is commercialization.
Group mean differences show that farmers who sell more of their output demonstrate higher
technical and allocative efficiencies for both maize and beans. Commercialization is also a

prominent factor in inducing farmers to adopt IPM technologies, as demonstrated by a bivariate
logit regression.

Technical and allocative efficiencies are compared for a variety of human and social
capital group means. Extension is shown to be a substitute for education at low levels of
education in improving technical and allocative efficiency. However, at higher levels of
education, different types of extension methods, such as publication circulation, appear to
complement general education. Education, literacy, health and experience show positive
influences on efficiency.

The greater efficiency of collective parcels suggests that the internal dynamics of the
institutional "black box" of the firm are sound. However, transactions with support agencies are
undependable as evidenced by ineffective distribution and marketing systems. Failure of implicit
transaction contracts results from disparate incentives between HARC members and agency
personnel.

Collaboration with the private sector, which shares HARCs' economic aspirations, offers
a means to capitalize on the economies inherent in the cooperative structure and efficiencies
spurred by commercialization. The few cooperatives which contracted private capital show that
HARCs can evolve into cooperatives that produce high quality products and generate investment
returns that significantly increase member income and achieve social goals.

xii

CHAPTER 1
INTRODUCTION

The Honduran economy deteriorated significantly during the "lost decade" of the 1980s
(see Hayes 1989) in spite of large infusions of U.S. financial aid. Per capita GDP, which grew
annually at 2.2 percent between 1961 and 1980, fell at an average annual rate of 0.5 percent over
the next ten years. Gross domestic investment and the real minimum wage also fell over the
same period. The share of external public debt to GNP was 1 13.8 percent in 1991, twice the
1980 level {World Development Report, 1993). Most of those funds were invested in state and
parastatal agencies that are in the process of being privatized under pressure from the IMF and
the World Bank.

In 1991 Honduras' per capita GNP stood at US$ 580 (World De\elopment Report 1993),
exceeding only that of Haiti in the western hemisphere. Over half of the country's 5.3 million
inhabitants live in rural areas where absolute poverty, the inability to afford enough food to meet
minimal nutritional requirements, is more pronounced. About 20 percent of the population is
unemployed {Europa Yearbook, 1991), but casual observation suggests a high degree of
underemployment as well. Infant mortality stands at 49 per 1,000 births and stunting afflicts 34
percent of all children between the ages of two and five (World Development Report, 1993). At
least 12,000 Honduran children die each year due to preventable illnesses, 25 percent of
Honduran families suffer from protein deficiency and 62 percent show inadequate caloric intake
(Barry and Norsworthy, 1990). Seventy-three percent of the population is literate (World

Development Report, 1993), but functional literacy - the capacity to read sufficiently well to cope
with modern instructions - is probably lower.

Unlike its Central American neighbors, no powerful oligarchy emerged in Honduras'
history as the dominant political and economic force to beget extremes of wealth and poverty.
Still, incomes and land ownership are skewed. The richest 20 percent earn 63.5 percent of total
national income while the poorest 20 percent earn 2.7 percent {World Development Report, 1993).
Four percent of Honduran farms comprise 56 percent of total farmland, while 64 percent of the
farms comprise nine percent of the farmland (Barry and Norsworthy, 1990). Such distribution
may be acceptable in developed countries, but the distress of resource maldistribution in an
agrarian based economy is inversely related to the size of a nation's resource base and directly
related to the size of its population. It is interesting to note that only one in five Honduran farms
is worked by its owner. The majority of farmers work under sharecropping or tenancy
arrangements, or on municipal lands termed ejidos (Kurian, 1987).

In an attempt to redress the problem of land maldistribution and mral poverty, Honduran
governments have made sporadic attempts at land reform. Most farmers who wanted to obtain
land under reforms were obligated to join an asentamiento (precooperative) and work collectively
with other land reform participants in order to qualify for credit. By 1984, about 294,422
hectares of land had been allotted to land reform groups. Total membership in the groups,
however, declined from 61,176, counted at the time of land apportionment, to 48,129 in 1984
(Instituto Nacional Agrario. 1985).

Cooperatives are ostensibly preferred because they permit independent farmers to jointly
make investments in production, storage and marketing activities that they would be unable to
make individually, and because they provide a sense of security to members who individually can
be devastated by the uncertainties of agriculture. Cooperatives also serve as educational

institutions and provide an efficient structure for development agencies to perceive production
constraints and rural needs so that responses can be formulated in the form of credit and technical
assistance. Cooperatives are thus intended to achieve both economic and social goals.

However, Honduran agrarian reform cooperatives (HARCs) often fall into bankruptcy
or never achieve a position of financial independence even though ample financial and material
support have been provided. In 1982, 57 percent of the loans to ±e reform sector were
delinquent (Stringer, 1989). Blame for cooperative failure is commonly placed on members, and
accusations are heard of corruption, non-cooperation and apathy. But such problems, or at least
the potential for them, are present to some degree in all firms. Given the extreme poverty in
Honduras, and the physical and mental frailty that inevitably accompanies it, cooperative failure
may result from an underinvestment in human capital and institutional flaws which fail to account
for human capital deficiencies.

HARCs have a notorious record of inefficiency, owed principally to the high rate of loan
defaults. The precise nature of the inefficiency, however, has never been rigorously analyzed.
An abundance of conjectural notions attribute inefficiency to ignorance, corruption or culture.
Even development plarmers and social scientists are quick to discount cooperatives as infeasible
forms of association, in spite of their theoretical advantages.

It is possible that cooperatives do capture some forms of efficiency better than, or at least
as well as, other forms of organization, but due to persistent bankruptcy they are rejected in
whole. Do cooperatives fail because production is inadequate? Are cooperatives allocatively
inefficient, investing in inputs that do not generate a justifiable value with respect to their
marginal addition to production? Or are they both technically and allocatively efficient, but
experience financial collapse because they are poorly managed? Distinguishing services that
coops can perform successfully vis ^ vis those which they cannot will suggest specific aspects of

policy measures that hold a higher probability of solidifying sustainable cooperative enterprises.

Objectives

This dissenation endeavors to examine how HARCs can become more "efficient." The
concept of efficiency is multi-faceted, related to physical input-output relationships, human capital
investments, internal firm organization, market operations and relations with public and private
organizations. The lines between each facet are not always conveniently distinct for the purpose
of analysis. Efficiency concerns of HARCs are intuitively characterized in three areas:
technology adoption, a requisite for improving technical efficiency; production efficiency in terms
of both physical input-output, or "technical," efficiency and price or "allocative" efficiency; and
institutional efficiency, or the rules that govern HARC operations. All are examined vis k vis
human capital investments upon which HARCs both depend and are mandated to augment.

Although HARCs have had a notably poor record in achieving financial viability, little
research has been done concerning the possible means of rectifying characteristic problems. Thus
the primary objective of this dissertation is to identify efficiency weaknesses in HARC operations.
Additionally, this dissertation contributes to the general knowledge of ajricultural development
concerning aspects of cooperative organizations that depend on human capital investments and
broadens the scope of empirical cooperative and human capital studies.

The following objectives are designed to identify aspects of institutional behavior and
human capital investments characteristic of Honduran cooperatives so that policies may be drawn
to improve economic performance:

1. Review the evolution of forces that institutionalized HARCs.

2. Examine how human capital, extension methods and demographic characteristics
influence the adoption of integrated pest management (IPM) techniques.

3. Compare the technical and allocative efficiencies of individual production systems vis
^ vis collective production systems.

4. Examine how human capital, extension methods and demographic characteristics
influence technical and allocative efficiency of individual production.

5. Examine the complementarity of education and varying extension methods in
improving technical and allocative efficiency.

6. Synthesize the results in a new institutional economics (NIE) rubric in a manner which
yields viable policy alternatives.

The Arrangement of the Dissertation

The chapters below probe three principle underlying facets of HARC operations. Chapter
2 reviews the evolution of forces that instituted HARCs. How human capital influences the
adoption of advanced technology, an intermediate step in improving and modernizing agriculture,
is examined in Chapter 3.

Chapter 4 presents a stochastic frontier model and empirical results of collective and
individual production systems. Collectivization has been indirectly mandated within the reform
sector as it has traditionally been a requirement for HARCs to receive credit and support services
from government agencies and because ownership of individual parcels has been precluded by
land reform legislation. Technical and allocative efficiencies are compared for collective and
individual parcels. A stochastic frontier estimation of bean production is presented in Chapter
5 and compared with maize estimations presented in Chapter 4. Beans are grown using a more
traditional technology than maize.

Human and social capital deficiencies are often cited as sources of inefficiency within
HARCs. Human and social capital are examined directly in Chapter 6 as they pertain to

allocative and technical efficiency. Chapter 6 further examines the complementarity of education
and extension techniques in improving technical and allocative efficiency.

Finally, empirical results are synthesized in Chapter 7 and interpreted within the broader
discrete institutional framework in which HARCs operate. The gathering of data involved
extensive fieldwork, dozens of cooperative meetings and contact with government support
agencies. Relating empirical results to general observations of the operating environment is a
further means of capitalizing on direct fieldwork. The intention is to identify short-run
modifications in HARC governance to account for human capital shortages that generally require
long-run investments.

CHAPTER 2
EVOLUTION OF FORCES THAT INSTITUTED
HONDURAN AGRARIAN REFORM COOPERATIVES (HARCS)

Agrarian structures in Central America have evolved over the last 500 years in response
to political and economic shocks. Unlike North America, where agricultural settlements
completely supplanted Indian communities, Hispanic colonization incorporated indigenous peoples
to extract scarce labor and foodstuffs.

Aspects of current Central American agricultural organization can be traced back to
colonial and even pre-coloniaJ eras. Placing the current system within the context of political
history reveals institutional transactions (Bromley, 1989) that served to minimize transaction costs
(Coase, 1937 and Williamson, 1985) for interests that influenced Honduran agrarian reform
cooperatives (HARCS). Institutions that ostensibly serve HARCs wan-ant reevaluation in the
post-Cold War world to identify structures that misaligned incentives with enforceable
responsibilities. Transaction costs may be reduced by reorganization within the constraints of
available technology and capital investments, major focuses of this study.

The purpose of this chapter is to review the forces that both motivated and constrained
Honduran agrarian reform throughout history. Those forces explain peculiarities in the design
of HARCs, relative to the organization of classical economic firms, that provide a context within
which to interpret empirical observations.

The Pre-Colonial Period

The ancient ethnic conflicts persist in Guatemala and southern Mexico are relatively
absent in Honduras. However, a review of pre-colonial institutions offers insight into the Spanish
colonial framework that was established to control indigenous populations and the post-colonial
tenure systems that emerged.

Agriculture

A variety of Indian cultures inhabited Honduras when the Spanish initiated their conquest
in the sixteenth century. Historical evidence is available for the Mayan society, which stretched
from western Honduras north to the Yucatan. Information is scarce regarding Indian societies
that resided in the central and eastern regions.' However, a few reliable observations about the
pre-colonial Honduran agricultural economy may be obtained from previous studies.

Maize and beans, which continue to form the basic staples of Central American diets,
were cultivated in all areas of Honduras along with manioc and sweet potato. Except for a few
small irrigated systems in the Mayan region, farming in Honduras was rainfed. Remnants of
gardens and orchards have been found, especially along the banks of rivers where flood waters
brought natural fertilization. Only the mute dog and the turkey were domesticated for
subsistence. Tribes in eastern Honduras were more reliant on hunting .ind gathering and were
generally smaller and more dispersed than those in western and central Honduras.

Human carriers and canoes formed die only modes of transport. Central American
Indians used no animal traction and, in spite of impressive Mayan intellectual achievements in

'A discovery of a burial tomb of "glowing skulls" was recently made in the area, but
research results are still being processed.

mathematics, calendrics, architecture and astronomy, never developed the wheel. Trade was thus
limited primarily to clothing goods such as fabrics and feathers and light agricultural products.

Swidden agriculture, a constrained form of which is still practiced in Central America,
was the predominant farming method. This is an extensive system of cultivation which generally
requires at least two years of fallow for soil rejuvenation. Land was cleared by hand with stone
axes and cultivated with hoes and digging sticks (the barreta, which is .;till in use). Typically,
farmers abandoned one site after cultivation and slashed and burned the debris from another, the
fertility of which had been restored by time and natural vegetation. The length of the
rejuvenation cycle varied across regions, but at least twice as much fallow land was required to
sustain output.

Institutional land constraints have deprived most contemporary Central American farmers
of the rejuvenation portion of the cycle, although debris from the previous season's crops are still
burned. Rising populations have further tightened those constraints, contributing to acute social
and political conflicts.

Land Tenure and Labor

The Mayan Empire was never ruled by one authority, but their ;enters were larger and
more advanced in terms of abstract knowledge, technology and economic diversification than
other contemporary indigenous populations in Honduras. The degree ( f centralization and the
bases of economic support and activity varied across settlements and time. The most fundamental
organization of ancient Mayan society was, as it continues to be, the nuclear family.

Morley et al. (1983) argue that as class distinctions widened, the Mayan elites coerced
peasant classes into a feudal relationship whereby the peasants were apportioned land to cultivate,
the product of which was shared with the nobles. In exchange for their igricultural production,

as well as military service and non-agricultural labor, the peasants may have received protection
from outside raiders.

The chiefdoms in western and central Honduras were primarily dependent on subsistence
agriculture. They were not as diversified as the Maya, but nobles employed commoners or slaves
for the goods and services they consumed (Torquemada, 1723). The smaller tribes in eastern
Honduras were more egalitarian; the only division of labor was based on sex and age. Men
undertook the clearing of lands and hunting and fishing, while agriculture and child rearing was
primarily entrusted to women.

The Colonial Period

Although Honduras was discovered by Columbus by 1502, colonization was not
effectively imposed for decades. Other conquests in the new world offered greater reward at less
expense, owed principally to Honduras' rough terrain, relative lack of processed precious
minerals and lack of broad social structure. The riches of the Aztec and Inca made the
opportunity costs of conquering the scattered tribes of Honduras prohibitive to the
conquistadores. Nonetheless, colonization eventually came and obliterated aboriginal chiefdoms
and tribes in Honduras. Newson (1986) speculates that by the end of colonial rule, over 90
percent of the Indian population had been annihilated by slavery, forced labor and disease.
Miscegenation further eroded Indian communities, giving rise to the predominance of Honduras'
mestizo population.

Agriculture

The Spaniards introduced new crops and agricultural methods, but the technology of
production and the crops grown on Indian lands changed little. Indigenous foods of maize and

beans became a fundamental part of the colonialists' diet. The Spanish either produced their own
conventional grains of wheat and rice, or extracted them as tribute from Indians who had to be
supplied with implements and draft animals. Converse to current production patterns, wheat
production expanded in colonial Honduras to meet domestic market demands, though rice did not.
Rice now constitutes a staple and is produced throughout Central America. Virtually no wheat
is grown in Central America, though wheat products are becoming increasingly popular, owed
principally to PL-480 shipments. Colonists also successfully introdu;ed bananas and citrus
products, commodities that now form the backbone of the Honduran export economy.

Agriculture in colonial Honduras was dominated by livestock production. Cattle, horses
and mules found a compatible new environment in the disease and predator-free high grasslands
of the Honduran savanna. The mule and horse industry flourished to satisfy demands in
agricultural production, mining and, most importantly, in transport. Indigo, hides and tabasco
were produced for export to Spain, but were minuscule relative to mining operations (Newson,
1986).

Land Tenure and Labor

The design of colonial institutions was endogenous to the accessibility of indigenous
populations and the nature of social structures, particularly with respect to labor hierarchy and
land tenure, that confronted the Spanish. Tribal divisions and warfare, which had been
accelerated by the Quichi overextending its dominance to other Central American tribes, also
provided incentives for tribal leaders to collaborate with the militarily s iperior Spaniards.

According to Newson (1986), the Spanish extracted slaves from easily accessible lowland
areas in Central America to work in colonial mining operations. In the relatively remote
highlands, the existence of a jurisdictional structure provided the conquittadores with a low cost

means to secure a ready labor supply. The Crown granted encomiendai to colonists that in
essence conferred property rights over the Indians while ostensibly providing the Indians with
protection and instruction in the Catholic faith. In exchange, colonists were allowed to levy
tributes in the form of goods or money and, initially, labor, on the Indians.

Agriculture initially played a subsidiary role to mining in the colonial economy of
Honduras. Colonists turned increasingly to agriculture as urban living expenses spiraled and
opportunities for wealth creation declined in urban areas (Macleod, 1983). High food prices also
served as an inducement to establish agricultural enterprises and supply urban dwellers (Frank,
1979). Tributes, exacted through encomenderos that often exceeded legal bounds, constituted the
most important source of Crown revenue.

Rampant violations of colonial duty and the abdication of protection obligations forced
the Crown to transfer tribute exaction to local administrators who established labor quotas
(repartamientos^) in indigenous villages. By that time, disease and forced slavery had taken a
serious toll on Indian populations, and thus on the available labor supply. Colonists then divided
up Indian labor for not just public and religious institutions, which had been the original intention
of the repartamiento, but also for private individuals. The work was so arduous and the pay so
minimal, laborers suffered malnourishment and were unable to work their own land adequately.
Poor diets for the Indian workers and their families further weakened their resistance to
prevailing epidemics.

Encomiendas and repartamientos served as viable tools of enforcement in areas where
Indian states and chiefdoms already existed because most Indians were accustomed to paying

^" Encomienda" comes from the Spanish word encomendar, which means "to entrust."

^"Repartamiento" is derived from the Spanish word repartir, which means "to divide" or
"to distribute. "

tributes to authorities and because the hierarchical structure provided a low cost means of
exercising control over large populations. In areas absent of large social structures where
nomadic tribes subsisted on swidden farming, hunting and gathering, the incorporation of Indians
into the colonial economy was cost prohibitive. The Crown charged Catholic Missions with the
task of training Indians how to function in the culture diat had over-powered them. However,
small disparate tribes were only brought under control when their attacks caused costly
interference in Spanish commerce. In such instances Indians were routinely exterminated or
captured for slavery.

Pre-colombian Indian land holdings were technically honored by royal decree. In reality,
however, Spaniards either ignored the decree or circumvented it by various means. The very act
of proclaiming property rights to indigenous peoples was a defacto expropriation of the land they
inhabited. Ultimate ownership rested with the Crown and was exercised on its behalf through
judicial appointees for mutual economic benefit.

Land was offered to Spaniards as an incentive for colonization and the conquest of the
Americas and came to be a valuable source of government revenues necessary to protect royal
property. Martinez Peldez (1975) contends that the Crown extended property rights to die
Indians as a means of ensuring their presence to pay the agricultural tributes needed to supply
mining activities and urban lifestyles.

In 1591, the Crown instituted two portentous cedulas (decrees) affecting land tenure. The
first, which ostensibly would have benefitted the Indians, ordered all lands illegally usurped to
be returned to the Crown. The second cidula, however, granted that illegally owned lands could
be rightfully purchased. Colonists, by virtue of their much greater wealth and knowledge of
Spanish law relative to the Indians, were able to circumvent the first cidula to benefit from the
second. Redistribution of power or influence was confined to Spanish appointees or

entrepreneurial Creoles who accumulated enough capital to invest in lucrative official positions
(Brading, 1986). This skewed distribution of land prevails in Honduras.

The encomienda system lasted longer in Central America than in any other area of
Spanish America (Newson, 1986). The current demographic complexion of Honduras began to
take shape as the Indian population was surpassed by the mestizos through slavery, disease and
miscegenation. Royal Decrees offered no property rights to mestizos as it had to Indians.
Latifundios expanded through the exploitations of mestizos, who were forced to devote portions
of their production in exchange for usufruct privileges (Martin6z Pel^ez, 1975).

Independence

Latin American revolutions in the 19th century were inspired by their North American
counterparts and facilitated by Napoleon's incursions into Spain. However, while much of the
independence rhetoric was similar, the Spanish aristocracy continuec". to rule. Apart from
forswearing formal titles that eliminated colonial taxes, little else changed for the majority of the
people.

Central America was polarized between two forces that would continue to squabble, at
great expense to economic development, into the twentieth century. The conservatives arose from
Spanish aristocracy and sought to maintain colonial institutions and social classes without the
burden of royal tribute. The liberals, comprised mostly of elite bureaucratic professionals that
formerly served the aristocracy, saw economic benefit in reforms that expanded economic
opportunity.

A major source of contention between liberals and conservative-, concerned the Church
as a formal component of government. The Church conferred moral justification on die
privileges enjoyed by elite conservatives and was instrumental in quelling the masses. Perhaps

most destructive to long-run stability and development was the disp;ite on education. The
conservatives wanted to maintain an elitist system of education under the auspices of the Church,
while the liberals promoted secular, and ultimately mass, education. Like the Crown,
conservatives claimed and exercised the right to make ecclesiastical appointments (Barnadas,
1986).

Liberals sought to reduce trade barriers and eliminate monopoly rights that conservatives
held by virtue of their royal commission. Liberals also wanted to ban the nepotism of
conservatives in governmental, commercial and ecclesiastical positions.

Both parties were comprised of elite, urban, intellectual interest", and encompassed only
a small portion of the total population. Notions of broad-based utilitarianism, promoted most
notably by Jeremy Bentham, provided a philosophical rallying force to revolt against Imperial
Spain. However, the exact terms of "utilitarian" economic design did not result from such
popular consensus.

Honduran Independence

Honduras experienced three independences in the frenzied rebellions that swept the
Spanish Americas in the nineteenth century. It was first liberated from Spain as part of what was
to be the Kingdom of Mexico. Anarchy in Mexico afforded the Audencia de Guatemala an
opportunity to institute its own autonomous government, Provincias Unidades del Centra de
America. With the exception of Chiapas, all the states of the Audencia revolted against Mexico
and joined the Provincias.

Central American unity, however, was hampered by the surge of hemispheric
independence that permeated all levels of society. Motivations for local participation and
autonomy were born of nascent ideals and economic opportunity. Powerful regional caudillos

(political/military strongmen) in each state provided conservatives the foixes needed to defeat the
liberals, led by Francisco Morazan, but they ultimately dissolved Central America into five
independent states. Independence for Honduras was thus a by-product of war strategy rather than
a popular consensus based on cultural heritage or economic principles.

Elections notwithstanding, caudillos ruled Honduras from 1839 until the mid twentieth
century. The private acquisition of public and Church lands, a hallmark of liberal economic
programs intended to stimulate exports and growth, aroused a symbiotic alliance between colonial
elites and the Church on the one hand, and Ladino and Indian communities on the other.
Conservative forces respected Church property rights and supported preservation of ejido lands
for subsistence farmers, who constituted the majority of the population. Economic growth slowed
under conservative rule, the country returned to traditions that reflected traditional Hispanic-
Catholic principles, and subsistence farming gained in prominence vis k vis export agriculture.

Apprehensions about capitalism also arose from the lack of government capacity to
administer a broad-based development agenda. Liberals attempted to op-in alarming proportions
of property to foreign investment. A debilitating shadow over liberal economics was cast by
William Walker, a U.S. citizen who, in the name of democracy and economic freedom,
proclaimed himself president of Nicaragua. His group of predominantly Mississippi Valley
mercenaries recruited after the Mexican-American War expected to receive land in return for
their services and were extremely unpopular in Honduras, which had proclaimed war on the
United States to defend Mexico. They represented the detrimental excess of economic
liberalization: foreign usurpation of domestic resources and political control. Walker, who was
executed in Honduras after a failed filibuster, severely discredited Liberal policies throughout
Central America and intensified anti-American sentiments that prevail tc this day.

Honduran Land Tenure 1821 - 1898

The land tenure patterns that evolved in post-independence Latin America differed
substantially from those in North America. The United States and Canada opened their frontiers
to settlers, allowing for a more equitable distribution of wealth and ensuring property rights to
people within the political and economic system (ethical considerations regarding the usurpation
of Indian lands aside). Property rights were much more tenuous in Latin America, owed to the
continuation of ejido lands and absentee landlordship of large holdings. Agricultural technology
lagged in Latin America, restricting labor productivity and the consequent labor and food
surpluses exigent to industrial growth.

The industrial revolution in the mid 19th century that transformed the global economy
influenced Honduras' Central American neighbors much more than Honduras. Recorded history
and data on the 19th century Central American economy are sparse, but some policies and
especially the reactions to them reveal distinguishing features of Honduras. Coffee plantations
arose in Guatemala, El Salvador and Costa Rica in response to rising world demand, but did not
take hold in Honduras until the twentieth century.

Liberal reforms regained prominence among Honduran political philosophers who also
contended that, unlike the laissez faire reforms promoted by Francisco Morazan, government had
a pivotal role to play in economic development. Lacking a bourgeois class, Honduran economic
strategists considered government necessary to stimulate growth and secure integration with the
world economy (IHDER, 1980). A new constitution in 1880 mandated the state to establish
credit for Honduran enterprises and provide the infrastructure necessary to attract foreign
investment.

Liberal reform began in 1876 when President ]os6 Maria Medina, under economic
liberalization pressures from Guatemala, yielded the chief post to Marco Soto (Yankelvich, 1988).

Soto considered ejido structures inefficient and in 1877 instituted an agrarian law that slated
coffee, cacao and Indian rubber as favored exports (Guevara, 1983). The intent of the reform
was to propel Honduran agriculture into modern specialized production. Central to the agrarian
law was the dictate that municipalities sell any national lands to bidding entrepreneurs at a "just
price." The government took an active role in designing and monitoring the agricultural system.
Landowners and laborers of "modern farming units" were exempted from military and civil
obligations and the tariffs on imported agricultural inputs. The Government established strict
guidelines regarding such things as fencing, crops and laborers that constituted modern farming
units. Participating farmers were required to make written reports to demonstrate their
compliance every six months.

Interventions to stimulate the production of export crops failed. Reasons for the failure
are not clear. Coffee, which initially was considered the crop of greatest potential, began a long-
term decline in world demand soon after the program was mounted (Guevara, 1983). Also, labor
was not as inexpensive relative to other Central American countries, partially because some ejido
lands remained inalienable (IHDER, 1980; and Quinones and Argueta, 1978). Rugged terrain
and poor transportation and communication systems also hindered commerce.

Government support for transportation infrastructure was hampered by the enormous debt
it incurred from trying to build a transcontinental railroad earlier in the century. In 1892 the total
debt was over 73 times annual export volumes. Consequently, foreign investors were reluctant
to invest in Honduras. The failure to attract upstanding foreign investors rendered Honduras
vulnerable to riskier international investors who promised great returns but did nothing more than
further deplete the treasury. The bulk of Honduran agriculture thus remained a decentralized
system of traditional subsistence farming into the 20th century (Guevara, 1983).

Honduran Land Tenure 1898 - 1940

Banana exports began growing along the north coast of Honduras around 1880. Most
of the production came from small, independent producers who sold their produce to
intermediaries close to the coast or with river transport vessels. Banana production grew in
popularity among small commercial farmers. Unlike coffee, the favored export of the
government, bananas could be grown with relatively little capital investment and along rivers that
enabled transport. Most important, bananas presaged short-run gains.

The liberal reforms' hapless attempts to establish a bourgeois class in the 19th century
were dealt a decisive blow by the emergence of international banana companies. Twentieth
century commodity production, storage and transportation required capital investments beyond
the reach of most Hondurans and certainly beyond that of small-scale farmers engaged in banana
production. Ultimately, foreigners established large banana plantations that sold directly to
exporters, thus undercutting both small Honduran producers and intermediary transporters
(Guevera, 1983).

Honduran land reforms during 1898-1961 reserved public lands for family parcels. The
Honduran Institute of Rural Development (IHDER, 1980) identified two characteristics of land
reforms during that period. First, the reforms established inalienable property rights, the intent
of which was to impede land concentration and proletarianization of rural labor. The 1924 decree
stipulated that family parcels be 20 hectares (Stokes, 1947). Second, because reform parcels
were small and used primarily for subsistence crops requiring only about ..00 labor days aimually,
land reforms provided an abundant, low wage seasonal labor force. The motivations for the
various decrees during this period have been attributed to the government's desire to spur
economic growth and generate tax revenue (Villanueva, 1968) and to ameliorate lay-offs in the
banana industry (IHDER, 1980).

Most of the pre-Cold War land reform debate was rooted in disputes between campesino
unions and large American fruit companies. Land reform initiated in the basic grain sector is
distinct in many ways from land reform in the banana sector. Integral to both sectors were the
campesino unions that fused political strength among the landless to pressure for land
redistribution.

Campesino Unions and the Design of HARCs during the Cold War

The first campesino unions appeared around the late 1920s. Financed and influenced by
the communist party (Posas, 1981), they were characterized by the inflaiDmatory Marxist rhetoric
that began fueling the reactionary backlashes to a broad range of grassroots social organizations
characteristic of, and crucial to, open democratic societies. Campesino unions were influenced
by national and international forces which, particularly throughout the Cold War, had enormous
leverage over the design of HARCs. Those forces arose from political exigencies that, unlike
the forces that forge autonomous cooperatives, did not necessarily hold economic efficiency - or
even viability - as a guiding principle.

Cuba and Bananas

Two events in the 1950s had dynamic impacts on Honduran agrarian reform, the Cuban
revolution and the lay-off of over 18,000 laborers on banana plantations. Labor organizing was
already afoot in Honduras prior to the Cuban revolution. Labor and farm organizations were
inspired significantly by Cuba, as were academic institutions that could provide scarce technical
and logistic support for mobilization activities. Massive floods and an unprecedented strike in
1954 in which 25,000 workers participated gave United Brands incentive to restructure by closing
operations on marginal lands and by making labor-saving capital investments. The company

reduced its labor force by 69 percent between 1954 and 1963 (Posas, 1987). Those workers were
forced to return to subsistence production, but they returned with a new form of human and
social capital embodied in the capacity to organize for worker rights.

Campesino unions modeled their organization on urban and banana company union
mentors, whose objectives and optimal strategies were different from landless farmers. Urban
and plantation workers tend to be more concentrated than campesinos, allowing for relatively low
costs of coordinating activities. It was easier to define and achieve consensus on the goals among
urban and plantation union members than among campesinos. Association with and support of
internationally polarized "labor" organizations also drew campesinos into conflicts about which
they had little understanding and to which, by virtue of their geographical dispersion and
illiteracy, their interests were more vulnerable.

Two principle campesino unions emerged in Honduras at the inception of the Cold War.
The first, the National Federation of Honduran Campesinos (FENACH^ was an offshoot of the
unionizing apparatus of the 1954 strike. Although FENACH was spawned by autonomous local
organizations largely devoid of revolutionary ideology, two of its three principle leaders were
militant communists (Posas, 1987). Within two months of the founding of FENACH in 1962,
another, less radical, campesino organization appeared, the National Association of Honduran
Campesinos (ANACH). ANACH could claim some lineage to the grassroots 1954 organizations,
but it also received support from the American Institute for Free Labor Development (AIFLD),
an AFL-CIO affiliate that received funding from the U.S. Agency for International Development
(US AID) and from its parent organization, the Inter-American Regional Organization of Workers
(ORIT). ANACH was clearly a union established by foreign funding as a moderating alternative
to FENACH.

Both ANACH and FENACH applied for personeria juridica, which technically confers
legal recognition on individuals or organizations. In practice it is used as an institutional
mechanism to support - or leave unmolestedthose in the government's favor. ANACH was
granted personena juridica two months after solicitation. FENACH, v/hose principle disputes
were with the Tela Railroad Company (a subsidiary of United Brands), was never granted
personeria juridica (Posas, 1981).

One would be hard-pressed to argue, given the collapse of communism, that Marxist
intellectuals' abstract notions of an ideal society, and particularly its attainment, were in sync with
the aspirations of uneducated laborers and farmers. On the other hand, opponents of
communism, however defmed, reacted in Honduras and throughout Lstin America on several
well documented occasions by means contrary to the democratic ideals which they espoused.
Cold-War reactions were also evidenced more subtly in development assistance programs.
Honduran agrarian reform cooperatives became tools of partisan international concerns which
relegated the long-term benefit of the HARCs subordinate to the attainment of political goals.

The Land Reform Law of 1962

The Cuban revolution prompted anti-communist forces within Latin America and the
United States to respond to landless farm workers as a means of quelling violent uprisings in the
western hemisphere. The Alliance for Progress, accorded at the Inter /vmerican Conference at
Punta del Este in 1961, stipulated that aid recipient countries must mount land reform programs
in order to qualify for assistance.

Though motivated by political exigencies, land reform also had economic underpinnings.
The redistribution of idle lands was consistant with the Kaldor-Hicks compensation principle in
terms of wealth in that resources began generating substantive economic gains; a potential transfer

could compensate absentee landowners for the negligible utility derived from owning but not
utilizing the land. Redistribution also constituted a stricter Pareto improvement in terms of
income in that the former owners derived no income from idle lands.

The Alliance induced democratically elected President Ram()n Villeda Morales to establish
the National Agrarian Institute (INA) in 1961. INA was mandated to respond to land petitions
and coordinate land distribution. It was also charged with providing support services, principally
the organization and support of cooperatives.

The Villeda government passed the first land reform law in 1962 that slated not only
government lands for distribution, but idle private lands as well, thus requiring all lands to serve
social purposes. Unused lands were ostensibly subjected to progressive taxation or expropriation,
but ambiguously written laws and ineffectual enforcement capacity mitigated the threat to vigilant
landowners or land holding companies (IHDER, 1980). Property rights have never been clearly
defined in Honduras. To the extent that a real -estate market exists in Honduras, INA and the
judiciary serve as its clearing houses.

Latifundistas could also legally activate idle lands by establishing cattle ranching
operations, a convenient activity for absentee landlords that resulted in a threefold increase in
beef production while domestic consumption of beef declined (Monthly Review, 1985).
Transferring pastures to crops would apparently be a much more efficient use of the land in terms
of income, employment and foreign exchange earnings or savings (Garcia et al. 1988).

Growing popularity of structural reforms, legitimized by the Alliance for Progress,
pressured Villeda on one side while the landed status quo and banana companies pressured him
from the other. The opposing forces destabilized a balance that was vulnerable to interference
by a virtually autonomous military. Villeda's attempts to weaken the military through
institutional reform enraged commanders who were encouraged by dictators in Nicaragua and the

Dominican Republic to overthrow the government (Morris, 1984). Subsequently, aspirations for
land reform were cut short by the coup d'etat in October, 1963, led by Colonel Oswaldo Ldpez
Arrellano.

Campesino unions' expanding influence had apparently posed a greater threat than the
1962 agrarian reform. The military did not reverse the agrarian reform law, but weakened INA
and destroyed FENACH by ransacking its offices and assassinating its leaders. Consequently,
the slow rate at which land was being distributed was halved (Bueso, 1987).

L(3pez's tenure as dictator and later as a not-so-freely elected president was marred by
traditional bureaucratic corruption. Forces arose to effectively challenge the traditional caudillo
politics. Labor unions and business organizations recognized mutual benefit in extending
government participation to all sectors of the Honduran public. A severe hurricane and the
infamous "football war" with El Salvador mobilized Honduran society ■o work collectively for
the first time, propagating the wide-spread recognition of governmental rights. The agrarian
reform of Peru had also inspired younger military personnel, many of whom came firom
campesino families and empathized with agrarian concerns.

In 1971 Colonel L6pez ostensibly relinquished control of the political forum to
democratic elections. The campaign of 1971 brought Ramdn Ernesto Ciuz to the presidency for
a brief interlude from military rule. Cruz represented the conservative National Party, which
owed its strength to its alliance with, and the campaign management of, the military.

The Cruz administration prohibited land "invasions", a dangerous and final recourse
campesinos had to demonstrate the acuteness of their poverty and thus their resolve. Six
campesinos who had invaded land in the department of Olancho were cssassinated and several
others wounded and incarcerated in early 1972. Campesino unions contended land seizures were
"recuperations" rather than invasions because such land was actually govermnent or ejidal land

illegally expropriated by latifundistas through forged documents or outright bribery. Sensing
their alienation from the real political processes, ANACH planned a massive hunger march and
other actions that threatened social stability. In December the military restored order by
peacefully relieving Cruz of the presidency and reinstalling General Oswaldo L(3pez Arellano as
chief of state.

L(5pez returned to power cognizant of the need to broaden his political base. At a huge
rally shortly before the coup he emphasized that "The Armed Forces are composed of workers

and campesinos , the Armed Forces are not enemies of the workers and the campesinos."

Ldpez, who arose from campesino stock, proceeded to carry out the most extensive agrarian
reform in Honduran history.

Decretos Leves (Legal Decrees) Nos. 8 & 170

Within a month after assuming power, Ldpez promulgated temporary agrarian reform
legislation. Law Decree Number 8 (popularly referred to as Decreto No. 8). Decreto No. 8 was
billed as an emergency two-year measure necessary to respond to campesino needs until long-
term legislation could be designed. Unlike previous agrarian laws that were rendered ineffective
through myriad loopholes and ambiguities, Decreto No. S bestowed clear, decisive power on INA
to grant access to lands that were not fulfilling a social purpose. Consequently, the pace of land
adjudication accelerated dramatically (Figure 2.1). The purpose of Decreto No. 8 was to
incorporate campesinos into the economy and give willing workers the opportunity to improve
their livelihoods.

Tota I and Arab I e

30, QQD

40,000

20,000

10, 000

/ - ' * \

/ ' ^ \

/ ' * \
/ / \ \

\ 1 \ V — 1

' ^ \ / \ ^

' ^ \ — - 'A

■y'l

/ /

y ~ "

1 1 \^^^r ' 1 1

^.....^..^-^

1 1 1 1 1 1

1962 196'^ 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984

YEAR

Tota I Arab I e

Source- IHDER, 1980.

re 2.1 Adjudicated land: 1962 - 85

The declared "temporary" nature of Decreto No. 8 and the swiftness with which it was
implemented reduced the potential for opponents to organize and contributed greatly to its impact.
More than twice as much total and arable land was adjudicated under the scheduled two year
enforcement of Decreto No. 8 than the previous ten years under the agrarian reform of 1962.
Campesino mobilization is considered the pivotal factor that precipitated the reform. 92 percent
of the groups had to pressure INA in extraordinary ways to obtain land. Over 23,000, or 15
percent of all rural landless families, (about 140,000 people) were granted land-use rights to
108,496 manzanas (IHDER, 1980).

Upon expiration of Decreto No. 8 a new agrarian decree, Decreto No. 170 was enacted.
Decreto No. 170 consisted of 180 articles that in practice marked a return to legal sidestepping
and thus a deceleration in reform. Decreto No. 170 granted permanence to the temporary land-
use permits granted under Decreto No. 8 and maintained the authority to expropriate idle lands.
However, Decreto No. 170 also denied legal recourse to campesinos that obtained land by
invasion, a principle means of procuring land under lethargic government agencies.

Concomitant with the surge of land adjudications was the growth in public credit to serve
the increasing number of asentamientos'* in the reform sector. The low rate of loan repayment
to public lending institutions has come to be one of the major criticisms of HARCs. However,
large farmers have exhibited equivalently high default rates (Lele 1974. IBRD 1975). In 1980,
the total amount of non-payment in the nonreform sector was more than three times higher than
in the reform sector (IHDER, 1980), though the non-reform sector repaid 63 cents to the Lempira
compared to 56 cents for the reform sector.

*" Asentamientos are considered "pre-cooperatives" in that they have not been awarded
personerfa juridica, although they invariably belong to a campesino union that is legally
recognized. Technically, for a group to qualify for status as a coopera.ive, it must be granted
a personerfa juridica. Legal recognition is reserved for those organizations that have
demonstrated their good citizenship to the government.

Administrative corruption is not uncommon in Honduras. General Ldpez was ousted
from power after the Wall Street Journal alleged he had accepted a millicn-doUar bribe that saved
United Brands over 75 million dollars in taxes. Loan defaults become more understandable, if
not excusable, under such circumstances when looked at from the perspective of a politically and
economically weak campesino.

Agrarian Reform Amid Political Tumult: 1975 - 1988

L(3pez was succeeded by General Juan Alberto Melgar Castro in a peaceful coup d'etat
in April 1975. Melgar's power abided in anti-reform forces intent on curbing the pace of land
distribution. Over one-half of rural agricultural families were still landless after the reforms
achieved under the Ldpez regime, 56 percent of the land was still claimed by less than five
percent of the families (Table 2.1).

Table 2.1 Distribution of Farmland by Farm Size in Honduras, 1974

1 Oillt 01Z.V \HCXj . /

No of Farms

No. of has.

Under 1

jj, III

1 / . J

7^ S49

Z 1 , JtZ.

n 8

1 - 2

1 O /CCA

io,o5(J

1 Q Q

fir

2-5

1/CA

ZD. 6

L\JJ,0\JJ

5 - 10

28,264

14.5

201,274

7.7

10 - 50

34,390

17.6

729,361

27.7

50 - 100

4,433

2.3

301,228

11.5

100 - 1,000

3,304

1.7

763,673

29.0

1,000 +

169

0.1

395,330

15.0

Total

195,341

100

2,62),859

100

Source: Stringer, 1984.

Land invasions continued with little effective response from the government. Landed interests
belonging to the National Federation of Agriculturalists and Stock Raisers of Honduras
(FENAGH) began an intimidation campaign against campesino unions and land reform
proponents. Tensions were manifested in the summer of 1975 when, again in the Department
of Olancho, ten leaders of the National Union of Campesinos (UNC), two priests and two women
were murdered at the hands of ranchers and military officers. UNC has endured more violent
intimidation than any other campesino union in Honduras.

Frustrated with the Melgar government's unwillingness to provide basic protection and
its reluctance to enforce provisions pertaining to both idle and ejidal lands, the three national
campesino unions forged an alliance. The United Campesino Front (FUNC). Melgar responded
to FUNC with his plan "Operativo Reldmpago Juan A. Melgar Castro." The plan resulted in the
distribution of 8,722 hectares to 3,160 families. Melgar's reluctance tc either implement legal
reforms or decisively reverse them angered campesinos and the "Superior Council of the Armed
Forces" (CONSUFFAA) that installed him. Melgar eventually dismissed heads of INA and the
Labor Ministry who had been appointed by Ldpez Arellano and were proponents of reform, but
he was too late to demonstrate control. CONSUFFAA announced Melgir's resignation in 1978
and installed General Policarpo Paz Garcfa. Paz ruled until 1982, during which time few land
requests were processed.

Characterization of campesino unions was often based on association, not unlike the
McCarthy years in the United States. UNC sprung from rural developm;nt programs sponsored
by the Catholic Church and assistance from Christian Democratic Party. After the Second
Vatican Council in 1964 the Catholic Church placed new emphases on ministering to the poor,
which unsettled traditional power structures throughout Latin America. UNC was a part of the
General Central of Workers (CGT), an activist organization backed by Christian socialists in

Latin America. Although founded by 1972, UNC had to wait until 1984 to obtain its personeria
jurfdica (Posas, 1987). In another instance, Efrafn Diaz Galeas, a former president of ANACH,
riled financial sponsors by soliciting assistance from UNAH faculty, whom the sponsors
considered communists. The Executive Committee of ANACH yielded to threats of funding cuts
by dismissing Diaz. Dfaz later reappeared as the president of the Federation of Agrarian Reform
Cooperatives (FECORAH). a campesino union that was also delayed fojr years in obtaining its
personeria jurfdica.

ANACH, by contrast, long the largest campesino union in Honduras, had been relatively
unperturbed by the military, owed principally to its alliance with AIFLD. Generous operating
budgets financed by the AFL-CIO, USAID, and a number of private corporations ranging from
IT&T and Mobile Oil to Sterling Drug and Bacardi Co., (SITRAUNAH, 1979) gave ANACH
the capacity to bid organizers away from grassroots unions or hire talented organizers otherwise
uninterested in union mobilization. ANACH organizers were thus more financially beholden to
foreign interests than to the campesinos whom they represented. Unions that arise from
autonomous forces are by nature more democratic in that they must respond to the economic
needs of their members. Incentives existed in ANACH, on the other hand, to subordinate the
economic welfare of the HARCs to political priorities.

This is not to deny that the AFL-CIO had sincere ideological interests in preventing
unions from being overcome by communist control. However, the principle source of funding
for AIFLD was the US government (92 percent in 1969). Several members of the original
AIFLD Administrative Board headed companies that had large financial interests in Latin
America.

The strings attached to ANACH were unmasked in 1978 when Antonio Julfn M^ndez
accused the sitting president of ANACH, Reyes Rodriguez Ar^valo, of fraudulent reelections.

M^ndez demonstrated the veracity of his charges by congregating a majority of assembly
representatives in opposition to Rodrfguez. A year later at an ANACK national convention in
a Lion's Club hall in Siguatepeque, M^ndez again outnumbered Rodrfguez supporters 173 to 109.
Upon realizing he was at a political disadvantage, Rodriguez abandoned the convention to
reconvene in a military battalion. Paz Garcia had shown his support for Rodrfguez earlier by
deporting a missionary priest who had denounced Rodriguez's corruption (Posas, 1987). The
military did not recognize the majority of ANACH delegates, led by M6ndez and Camilio Padilla,
but ratified the Ar^valo faction. However, the M6ndez and Padilla coalition received a valuable
endorsement from the Confederation of Honduran Workers. M^ndez's authority would again be
unsuccessfully challenged in 1984 by an operative of General Gustavo Alvarez Martfnez, the
army commandeer responsible for the civillian crackdown and several disappearances in the
1980s.

The failures and tribulations of campesino unions cannot be solely attributed to external
forces. UNC and FECORAH arose from other labor organizations and, like ANACH, were
always in the process of splintering themselves. The fragmenting of unions was easier to
accomplish in rural-based unions than in urban or plantation unions because rural systems are
necessarily less centralized. Regional and local campesino union leaders hold more member
allegiance than national leaders.

Under Melgar, INA embarked on a policy that divided its resources between export crops
and basic grains. The Paz regime slated eight percent of INA's total budget to the basic grain
sector while designating almost 65 percent to commercial export crops. Bananas account for
about 22 percent of all national value-added and occupies less than five percent of area planted
to crops. Basic grains on the other hand, contribute only about 14 percent to value added even
though it uses about 65 percent of cropland (Stringer, 1987). Critics charged on social grounds

that land reform had become a colonization project through coerced collectivization and die
transferring of campesinos from their homes to areas where land was less constraining. On the
other hand, allocating labor resources to a higher level of employment has distinctive economic
benefits.

One persistent aspect of the post- WWII reforms was the attempt to propel the agricultural
population into modern agricultural production (IHDER, 1980). Neighboring Central American
countries had more advanced production and higher growth rates, but the maldistribution of
wealth and income contributed to social upheaval (Bulmer-Thomas, 1989). Honduran reforms
endeavored to escape that fate.

The Land Titling Program

In 1981 Roberto Suazo Cdrdova became Honduras' first democratically elected president
in 20 years. Suazo campaigned strongly on an agrarian reform platform. The pace of land
redistribution increased 75 percent over the previous four years. Nonetheless, at the end of
Suazo's tenure over 125,000 rural families still had no secure access to land (Ruhl, 1989). Rural
population growth alone fed the landless population faster than the land reform could reduce it.
Suazo had not satisfied his political mandate with respect to land reform.

In 1981, at the behest of USAID, the focus of land tenure adjustments switched from
outright redistribution of public or private lands to land titling. In order to qualify, a farmer
must demonstrate he has worked a specific parcel of land, but that his tenure was not secure or
legally binding. The primary intentions of the titling program were to provide workers of the
land collateral for credit and long term incentives to make land improvjments. The quality of
soil and the extent to which crops are commercialized influences participation in the land titling

program (Seligsan and Nesman, 1989). Those factors have also been s'lown to be important in
the adoption of technology (Martin and Taylor, 1995).

Structural adjustment measures have encouraged privatization mroughout all sectors of
the Honduran economy, including the agrarian reform sector. The land reform law of 1992
opened vast tracts of land for sale by cooperatives in the agrarian reform sector.

Collectivization

Beginning in 1962 land reforms in Honduras reversed the liberal tradition of distributing
specific parcels to individual families, opting for a collective form of enterprise. In theory,
collectivization improves efficiency by permitting large "lumpy" investments in production,
storage, marketing and input purchases that are beyond the capacit) of small, capital-poor
farmers. Cooperatives also theoretically reduce monitoring costs associat"xi with large enterprises
and lower transaction costs of providing extension and support services to large numbers of
farmers. In practice however, collectives have had a poor economic record. Attrition rates have
always been high in HARCs, averaging over 30 percent between 1962 2nd 1985 (Bueso, 1987).
Loan default rates were also disproportionately higher for HARCs than for individual farmers.
More than half of the National Bank of Agricultural Development's (BANADESA) loans to the
reform sector were delinquent as of 1982 (Stringer, 1989).

Incentives in Collectives

The conditions under which voluntary collectivization might occur are the focus of
agricultural production cooperative (APC) theory (Putterman 1986, 1989; Bonin, 1987; Carter,
1987) which contrasts the behavior of collective production based on va^ing work and revenue
sharing rules. APC theory customarily attributes cooperative failure to "shirking," the

relinquishment of individual responsibility to other members. The problem is that widespread
shirking leaves many responsibilities unfulfilled and negatively impacts cooperative performance.
The important question, however, is not if shirking occurs, but whether it overrides gains in
efficiency arising from worker collectivization.

APC theory does not take into account the role of human capital. Two of the collective
production systems often alluded to in discussions of APC theory, the Kibbutz in Israel and the
Hutterite communities in the U.S., place a high value on human capital investments. Nor does
APC theory - or the cooperative literature in general - distinguish the types of monitoring costs
that different cooperatives may be more successful in reducing. Illiterate members cannot carry-
out simple bookkeeping procedures and are obviously ill-equipped to oversee complicated
contracmal obligations. On the other hand, landless farm laborers are capable of monitoring the
unspecialized agricultural labor tasks to which they are accustomed. The shirking alleged by
Alchian and Demsetz (1972), would be relatively more difficult to accomplish under such
circumstances than the financial rent-seeking cited by Jensen and Mecklirg (1979). To the extent
that dignity is derived from labor, shirking may be unlikely to occur. Fieldwork is one of the
few endeavors available to HARC members, and one in which pride is evidenced in traditional
folklore, dance and song.

The exact nature of HARC breakdown caimot be easily attributed to shirking - at least
at the level of manual labor. In fact, a common charge leveled against campesinos is that they
are simple people who "love to work with their machetes in their milpcs (cornfields)," but that
they are disinterested about the more cerebral matters of managing technologically advanced
enterprises. HARCs' dismal financial history may abide in elements other than the technical
inefficiency implied by shirking. Even firms that are one hundred percent technically and

allocatively efficient could be ruined by financial mismanagement - especially if institutions do
not safeguard interest holders from "opportunism with guile" (Williamson, 1985).

Structural Contradictions of Collectives in Agrarian Reforms

The justification for land reform sits on tenuous ground when cooperatives are promoted
as part of the reform to capture economies of size'. Many reform advocates contend that skewed
land distribution results in inefficiency because small farmers are consid^jred to be more efficient
than large farmers (See Corner and Kanel 1971; Berry and Cline 1979; Cornia, 1985). On the
other hand, development planners impose cooperative structures in an attempt to capture
efficiencies that are supposedly absent in large operations. The economic argument for agrarian
reform cooperatives are thus fallacious unless large collective enterprises could attain greater
efficiency than those that are individually operated.

This may be a tenable proposition for land reform coopera.ives in Honduras and
elsewhere in Central America. Honduran agrarian structures are still emerging from precapitalist
modes of production and are often still characterized by absentee ownership and sharecropping
practices that maintain traditional production methods. By the same token, cooperatives have
lacked the managerial skills in both production technology and administration needed to exploit
the potential for economies of size. Scale economies that require specialization exact transaction
costs for monitoring because production processes become less personal (Bardhan, 1989),
partially, at least, explaining why sharecropping practices persist (Alchi;m and Demsetz, 1972).
But the cooperative naturally reduces monitoring costs because members are owners and bear

^ Economics traditionally treats efficiencies obtained from the simultaneous expansion of all
inputs as economies of scale. Economies of size, on the other hand, occurs when long term,
often "lumpy" and not necessarily simultaneous, investments lower the average total cost of
production. Economies of size is used here because it is more comprehensive and thus more
precisely represents efficiencies sought by the process of collectivization.

substantial peer pressure on one another. The desire to collaborate in a productive manner was
quite noticeable among the majority of HARC members.

Size economies in HARCs are likely to become increasingly attainable as technological
advances are adopted because long-run capital investments such as farm machinery, input
inventory, transportation and storage equipment reduce per unit costs of output. Such
investments provide new opportunities for coop members to exploit comparative labor advantages,
underscoring the importance of the division of labor to carry out specialized tasks and a
managerial workforce which can dedicate its time to identifying and implementing profitable
activities. Many of those opportunities depend on labor talents that can emerge only through
concomitant investments in human capital. The combination of monitoring cost reduction gained
through collectivity, and the division of labor gained through human capital may thus allow for
the capturing of size economies beyond the grasp of large individual farms or poorly skilled
cooperatives.

Beyond efficiencies in production, collectives reduce costs incurred by service delivery
agencies. New technologies inevitably require a learning process and are aggressively promoted
by input suppliers who exploit the glamour appeal those technologies hold on traditional farmers.
Cooperatives are efficient structures for technical and support agencies to monitor operations and
provide agricultural training to large numbers of farmers. Budgets in developing countries are
inadequate to employ enough support personnel and extension workers to train and monitor
individual farming operations. In cooperatives training is conducted through seminars from
professional instructors and, more importantly, transferred through other members (Martin and
Taylor, 1995).

HARC Collectivization: Underlying Forces

It is difficult to discern precisely why the collective was adopted as the predominant form
of operation and production in the Honduran agrarian reform sector. Stringer (1984) attributes
collectivization to Roberto Sondoval Corea who was appointed Director of INA in 1968.
Cardona (1979) ascribed the origins of collectivization to Jorge St. Siegens, a Romanian
economist who was contracted at the recommendation of UNESCO to serve as the Technical
Director and Professor of the Autonomous University of Honduras (UNAH). Posas (1987)
claims Virgilio Carias, Head of the Economic Research Institute at UNAH, initially promoted
the Israeli mode of production in the successful and broadly renowned Guanchfas Cooperative
on the North Coast.

Although the origin of collective production is unclear, one thing is certain: HARCs have
lacked proper incentive structures and enforcement mechanisms of contracts, particularly with
government support agencies, have been notoriously weak. Property assurances are also firagile.
HARC members hold no individual title to specific parcels. In fact, very few HARCs technically
own the land which they work collectively.

The motives for imposing collective production, through denial of credit and technical
assistance to individual farmers, are seen in almost all the official organizations that support the
HARCs. The government appreciates collectivization as HARCs can absorb additional farmers
who are more reluctant to risk their lives invading land than to arrange an agreement with HARC
members for formal admittance (IHDER, 1980). Collectivization also permits large financial
transactions to be made between loan agents and a few campesino union officials, outside the

scrutiny of individual HARC members. "Soft-state" governments such as Honduras are
vulnerable to nepotism and rent-seeking agency staff that could detrimentally exploit HARCs.

The notion of collectivization was also supported by nongovernmental entities in
Honduras for political, not economic, reasons. The campesino unions maintain more political
control over collectives than they could over individual farmers who, once owning a land parcel,
would be less dependent on the union and more difficult to mobilize. Cold War development
planners also found collectives (within a free enterprise rubric) to be a means of mollifying
communist supporters in allied countries.

CHAPTER 3
INITIATING EFFICIENCY GAINS:
TECHNOLOGY ADOPTION

Introduction

Technology adoption lies at the foundation of improving production efficiency in the
agrarian reform sector of Honduras. Technological change has rapidly become available to
HARC members whose production systems, rooted in ancient Mayan traditions, are still practiced
throughout Central America. Slash and burn methods of field preparation developed reflexively
over generations as farmers sought to maximize efficiency within the physical and institutional
parameters imposed on them. Abundant land resources of Mayan civilizations allowed farmers
to abandon fields long enough to become naturally rejuvenated. Fields allowed to lie fallow for
several years benefit from the natural growth of vegetation and composting which restore essential
nutrients to the soil. Unlike their ancestors, however, modern-day Central American farmers are
not afforded the luxury of moving on to another parcel of naturally rejuvenated land. Colonial
institutions and population growth have tightened land constraints and forced farmers to cultivate
the same land every year. Perennial cultivation tires the soil and gradually lowers yields from
traditional production methods.

Worsening soil fertility has provided impetus for farmers to seek and experiment with
various technologically advanced production methods. Expanded markets and complementary
technologies have provided further impetus. The capacity of farmers to respond to such pressures
often corresponds to their ability to purchase complementary human capital, either in themselves

or through hired labor. Small farmers usually lack the funds to purchast, necessary assistance for
technology adoption.

Environmental strain has also motivated development institutions to promote
environmentally friendly, or "sustainable," technologies. High-input strategies of the "green
revolution" depend on non-renewable natural resources. International agricultural development
institutions are now mandated to simultaneously pursue environmentally friendly and productivity
enhancing technologies (GREAN, 1995). Integrated pest management (IPM) technologies are
considered crucial to environmentally friendly components of agricultural systems.

Integrated pest management strategies require the identification of, and the complex
interactions among, organisms that occur in the crop system. IPM attempts to introduce
biological control agents that are compatible with management schemes and the ecological
dynamics of the agricultural system. The ultimate goal is to develop minimally disruptive
methods of managing pests that do not reduce the value of agricultural output. Those
technologies are being developed, but perhaps more challenging is the effective promotion of
technology adoption among farmers in developing countries. This chapter addresses that task.

Determinants of Technology Adoption

Education and extension have long been considered indispensable to technology diffusion
and the correction of attendant economic disequilibria (Schultz, 197.t). Lack of skill and
knowledge lie at the root of production inefficiencies which have restricted production systems
in developing countries from reaching their technical frontiers.

The level of human capital in Central American farmers in general and Honduran farmers
in particular is low. Functional literacy levels in rural Honduras stands at about fifty percent
(World Fact Book 1988). Institutional factors also influence the accessibility and appropriateness

of technology. Land tenure arrangements of small farms in Central America are tenuous,
increasing the risk associated with new technologies. Credit is available on a sporadic basis,
reducing producers' capacity to sustain newly adopted technologies. Farm and household size
vary in the region as well, playing important roles in the selection of technologies.

Technology transfer in rural Honduras is confronted with some formidable obstacles.
Assistance programs to introduce new technologies are often criticized fcr not taking into account
a common farmer's opportunity set, production constraints and, perhapj most important of all,
his mental preparedness to respond to assistance. If outside technology is introduced to an area
that lacks the skills to interpret and screen relevant information, then the "spill in" of the
technology will not occur.

In developing countries, much of the social science literature regarding technology lies
outside economics, focusing on normative notions related to political and social aspects of
production (Roy and Clark 1994). Birkhaeuser, Evenson and Feder (1991) review several studies
related to the determinants technology adoption and efficiency. Jamison and Lau (1982)
indicated that education positively influences productivity and technology adoption of Thai
farmers. Khaldi (1975) and Pudasaini (1983) indicate that education improves allocative
efficiency progressively more as the rate of technology adoption increases.

Martin and Taylor (1995) showed that producers of commercial crops and members of
cooperatives are more inclined to adopt new technologies than subsistence and independent
farmers. Their results also demonstrated that T&V training methods lave a multiplier effect
through personal contact of experts and friends, and are very effective in motivating technology
adoption in contrast to impersonal multi media techniques.

This chapter examines the adoption of integrated pest management (IPM) techniques
developed by the Integrated Pest Management Program (Spanish acronym MIPH) of the Pan

American Agricultural School. MIPH promoted IPM procedures among HARCS in the study
area (See Appendix I for data and study area).

IPM technologies merit inquiry on three counts. First, they are specific technologies
which can be investigated in depth with a few questions (See Appendix II for the survey
instrument). The second refers to the word "integrated" in the term "integrated pest
management." IPM technologies integrate several other production technologies ranging from
soil preparation to the point of harvest. Other technologies such as fertilizer application or row
spacing may be components of IPM, but they do not depend on other technologies to the same
degree as IPM. Thus IPM technologies serve as a proxy for the adoption of comprehensive
systems. Finally, IPM is pertinent to cooperative organizations because IPM techniques often
work more effectively at the level of common property (Rook and Carlson 1985; Meister 1980).

MIPH randomly assigned four different training types to HARCs in the sample. One
group was set aside with no training to serve as a control group against which extension efforts
could be measured. The training types were:

1. Printed material only

2. Lectures only

3. Lectures and printed material

4. Lectures, printed material and electronic visual aids.

Trained agronomists visited the groups on a regular basis to give lectures and/or supply
printed information. MIPH focused on common problems faced by basic grain producers and
suggested cost-effective means for overcoming them.

Methodology

The effectiveness of technology is ultimately gauged by the increased efficiency or profit
of farmers. However, a necessary intermediate step in that improvement is the actual adoption

of the technology, the simple yes or no decision of the farmer. Technologies exist that reduce
costs and alleviate environmental strain, but often do not spillover into widespread use.

Determining what influences the decision to adopt under various circumstances holds
policy relevance. Education and extension budgets are limited. Identifying the characteristics
of farmers that make them amenable to new technologies and the means by which those
technologies can be taught will permit scarce rural education and extension funds to be invested
more effectively. Evaluating adoption rates requires far less data dian evaluating actual
production responses and may be conducted at early stages of extension and education programs
to monitor the relative effectiveness of promotion techniques.

A common procedure in technology adoption studies is to examine dichotomous adoption
decisions as a function of factors related to the farm production system or the farmer's
background. Most studies enumerate site visits to measure die impact of extension services
(Birkhaeuser. Evenson and Feder, 1991). A few have attempted to directly identify the source
of the farmer's knowledge regarding a technology (J.K.Harper, et al. 1990; Martin and Taylor
1995). This study analyzes IPM adoption rates of HARCs as a function of human capital factors
and different types of extension programs in which HARCs had agreed to participate. The link
between extension and farmer contact is measured directly by the group extension method and
thus need not be asked.

Analyzing the decision to adopt or not adopt a given technology in a regression equation
requires the specification of a binary dependent variable. Probit or logit models (Maddala 1983,
Takeshi 1981). have been used extensively to investigate factors that influence technology
adoption. The basic linear form of these models is given by:

(3.1)

% = /3'Xi + e

where

= 1 if adopt

= 0 otherwise

It follows that
(3.2)

Prob{3?i = 1) = Prob (e-, > -jS'xd
= 1 - F(-/3'Xi)

where F is the cumulative distribution function for e.

The estimation procedure of the logistic function is maximum-likelihood because OLS
yields biased estimates (Burrows 1983; Domenich and McFadden 1975). Several studies have
employed logit regressions to examine technology adoption in agriculture in the United States
(Schaible and Whittlesey 1991; Harper et-al. 1990; and Zepeda 1990) and a few in developing
countries (Martin and Taylor 1995; Palanigounder 1989; Jamison and Lau, 1982).

Two regressions are run. One for adoption prior to pest infestation, and one for adoption
after infestation. Farmers were never asked directly whether or not they adopted a recommended
technology. Rather, enumerators gave farmers open ended questions regarding pest management
practices. A response was scored as a correct adoption if it corresponded to recommendations
made in the extension program. Adoption practices were queried regarding six prevalent pests.

Data and Model Specification

Farm size, human capital, labor availability and land tenure are considered important
characteristic variables that explain adoption rates (Feder et al. 1985). The following logit model
includes three sets of variables which influence farmers' decisions to adopt new technologies.
The first set (variables associated with parameters /3, to iS^) relates to the propensity to adopt
technologies, the second set (variables on parameters 0j to /Sio) represents experience with

advanced inputs, and the third set (variables on parameters 0u to |S,4y relates to the mode of

technology promotion employed by MIPH:

{3.3)Adopt = /3o + I3,LT30 + I3.GT50 + ^^Primary + fi.Qass + ^^old + ^flousehold +
^jParaiso + ^f,Seed + (3gHerbicide + ^iJnseaicide + ^.uFenilzer + ffi^Lecture
+ iS^iPublication + jS^^Lecturepub + ^^^ctureaid + ji^f^Prevent

Where:

Adopt = 1 if farmer adopted the technology, 0 otherwise.

LT30 = 1 if farmer's age less than 30, 0 otherwise

GT50 - 1 if farmer's age greater than 50, 0 otherwis j.

Primary = Number of years of primary schooling.

Class = 1 if farmer attended literacy class, 0 otherwise.

Sold = Proportion of output sold.

Household = Number of household members.

Parafso = 1 if producer is from the region of El Parafso , 0 otherwise.

Seed — Years of experience with hybrid seeds

Herbicide = Years of experience with herbicide

Insecticide = Years of experience with insecticide

Fertilizer = Years of experience with fertilizer

Lecture = 1 if group received extension lectures without additional
teaching aids, 0 otherwise

Lectureaid = 1 if group received lectures accompanied by electronic visual

aids, 0 otherwise

Lecturepub — 1 if group received both lectures and printed extension

publications, 0 otherwise

Publication = 1 if group received printed extension publications and no

personal lecture, 0 otherwise

Results

The logit regression is displayed on Table 3.1. The model appears to "fit" the
data well, correctly classified estimates (based on a fifty-fifty classification scheme)
amounted to 93.46 percent and the model x^, which tests the overall significance of the
model, is significant at the one percent level.

The higher the proportion of output sold (Sold) shows a strong influence to adopt
technology. Primary education has a positive influence {Primary), but not as strong as
attendance at (literacy) Class. The Class coefficient could indicate more a personality
type than a transformation in thinking to adopt new technologies; farmers amenable to
becoming literate might be similarly amenable to adopting new production techniques.
Class would thus represent a predisposition to new technologies than an actual change in
thinking to adopt technology. The positive sign on Household supports the Boserup
hypothesis in that as constraints tighten on production systems, more advanced methods
are adopted. Farmers over the age of 50 seem less amenable to adopting new techniques
than their younger compaileros . The regional variable Paratso had a positive influence
on adoption, a result that could be attributed to better extension services or a more
activist campesino union prominent in the region (ANACH).

The only significant result among variables attempting to represent experience is
shown on the coefficient of hybrid seed. One of the primary goals of MIPH was to help
farmers with a history of pesticides misuse. Pesticides had been aggressively promoted
by retailers and some government extension agents. IPM technologies, by virtue of their
not relying solely on pesticide use, present additional obstacles to optimal technology

diffusion. Integrated pest management requires different modes of technology transfer
than traditional pest prevention strategies because commercial pesticide p -omoters benefit
from the latter and are often in conflict with the former(Agudelo and Kaimowitz 1991).

In terms of extension methods, both Lecture and Lectureaid registered positive
and significant influences on adoption. Bodi forms of extension provided personal
contact, an important if expensive extension method demonstrated influential in Martin
and Taylor (1995). Publication, which provided only printed materials is insignificant.
However, it is somewhat perplexing in that Lecturpub, which also provided personal
extension, is insignificant.

Table 3.1 IPM Adoption: Pre-infestation maximum likelihood estimaxs

Variable

Coefficient

Std. Error

Wald Statistic

Significance

Constant

-3.437

0.422

66.239

LT30

-0.320

0.274

1.3632

0.243

GT50

-0.663

0.246

7.2979

0.0069

Primary Education

0.089

0.046

3.6389

0.0564

Class

0.4028

0.1834

4.8266

0.028

Sold

0.542

0.198

7.4896

0.0062

Household

0.057

0.034

2 912

0.0879

Parai'so

0.374

0.194

3.7263

0.0536

Experience with:

Seed

0.127

0.034

14.2069

0.0002

Herbicide

-0.069

0.041

2.8689

0.0903

Insecticide

-0.0386

0.0369

1.0907

0.2963

Fertilizer

-0.059

0.037

2.5177

0.1126

Type of extension:

Lecture

0.524

0.249

4.4292

0.0353

Lectureaid

0.632

0.262

5.3276

0.0158

Leaurepub

0.060

0.282

0.0452

0.8317

Publication

-0.322

0.291

1.2242

0.2685

Chi-Square df Significance

-2 Log Likelihood 1102.132 2432 1.000

Model Chi-Square 80.088 15 .000

Improvement 80.088 15 .000

Goodness of Fit 2473.165 2432 .000

Predicted

Observed

Percent Correct

2288

100.00%

160

0.00%

Overall

93.46%

Summary

Technology adoption is a critical first step for increasing the efficiency of HARC
production. Improving the diffusion of advanced technologies is becoming increasingly
important in Central America as traditional slash and burn methods of production deplete the
agricultural resource base which must serve to feed rising populations.

IPM techniques offer a comprehensive "proxy" to examine technological packages
because they incorporate various aspects of the production system. IPM techniques also offer a
more precise means for examining the effectiveness of public extension programs because socially
optimal remedies of IPM are often at odds with those that are commercially optimal.

This chapter examined IPM technology adoption as a function of human resource factors.
Three sets of influences were considered, extension type, experience with inputs, and the
demographic factors that predispose producers to opt for new techniques. The model yielded
notable insights. The proportion of output sold is positively correlated with the decision to adopt
technology. Older farmers appear less likely to adopt, but literacy class and, to a lesser extent
primary schooling, are shown to be positively correlated with adoption. Lectures, both alone and
accompanied with visual aids positively influenced adoption.

CHAPTER 4
TECHNICAL AND ALLOCATIVE EFFICIENCY:
COLLECTIVE VS INDIVIDUAL

One of the most important economic policy issues facing restructuring and developing
countries concerns the relative efficiency of collective and individual enterprises. Cooperatives''
theoretical potential has been superseded by the observed and dismal le-el of their failure. The
term "collective" is rarely heard in the popular and business media without pejorative antecedents:
"inefficient," "lethargic," "bureaucratic-heavy," etc.. Many of the economic problems of
formerly communist countries and of poorly performing developing countries are attributed to
the waste incurred by collective organizations.

Inefficiency obviously exists in cooperatives, but its precise nature is unclear. Furubotn
and Pejovich (1970) predicted that cooperatives would degenerate in a capitalist environment as
workers/owners have relatively less incentive to make long-run capital investments. However,
cooperatives in France, Italy, and parts of the former Yugoslavia have notable success records.
And recent studies from Northern Italy (Bartlett, et al. 1992), and the former Yugoslavia (Boyd,
1987; and Piesse, et al., 1996) suggest that cooperatives are more efficient than private
enterprises.

'There are several types of cooperatives. Some organize economic agents for specific
mutually beneficial activities such as marketing or input purchases. Unless otherwise noted, the
term cooperative in this dissertation refers to full production cooperatives in which resources are
communally owned, labor is pooled in production and revenues are shared.

Conventional wisdom attributes inefficiency of collectives to "shirking," or the abdication
of personal work responsibilities. However, it is not clear whether shirking is most detrimental
at the level of the worker or at the management level.

Two articles laid the groundwork for the issue of shirking in labor-managed firms.
Alchian and Demsetz (1972) concentrate on the worker level, contending that individuals of a
collective enterprise lack adequate incentive to monitor coworkers because they do not receive
the residual claim awarded to managers of private capitalist firms. Even if one member is
appointed the task of monitoring, they argue, the monitor/manager has no authority to hire and
fire, and has no incentive to efficiently utilize and maintain fixed capital because the individual
portion of capital returns is less than the personal trade-off between labor and leisure.
Alternatively, Jensen and Meckling (1979) submit that shirking inefficiencies are most
problematic at the level of management. They consider it "naive" to believe that managers of
collectives would take the same pains to "seek out high pay-off new proje;ts, to weed out projects
which have negative pay-offs, to control waste and shirking, etc." without an addiuonal claim on
returns.

The distinction between worker shirking and management shirking is an important one.
The alleviation of widespread worker shirking involves substantial monitoring costs and may be
an exogenous social characteristic unresolvable by policy modifications. The success of the
Israeli Kibbutz, for example, as well as Amish and Hutterite communities in the United States,
is often attributed to pre-existing religious bonds that preclude labor shirking. Management
inefficiencies, on the other hand, are more easily overcome through restructuring and incentive
realignments.

Different sources of shirking generate characteristically different inefficiencies. The
selection of inputs is determined through management, but the actual input use is exercised by

workers. Suboptimal selection of inputs results in allocative inefficiem-y. However, any input
combination can be used in a technically efficient manner, and is a function primarily of worker
responsibility".

If "net-shirking," shirking so extensive that it over-rides gains achieved by economies of
size, occurs at the worker level as posited by Alchian and Demsetz (197',), technical efficiencies
will be lower on collective systems than individual systems. Allocati\ e inefficiencies may be
caused by two factors. Allocative inefficiencies could well be the result of management
disincentives, as maintained by Jensen and Meckling (1979). However, allocative inefficiencies
could also result from friction in input distribution systems, which are notably inefficient in
Honduras.

This chapter compares technical and allocative efficiencies of HARC individual and
collective maize production systems. Most research on issues related to :ollective vs. individual
production, beginning with Ward's "firm in lllyria" (1957) is theoretical in nature. Empirical
studies are rare because data sets comparing collective and individual enterprises are lacking.
A recent article by Carter, et al. (1996) examined Honduran agrarian re.brm cooperatives. The
authors estimated a standard OLS production function regression which included a dummy
variable on collectivity which suggested that collective organization had a positive effect on
production. The same study showed that 90 percent of surveyed H \RC members did not
consider shirking a problem. This chapter is intended to contribute to tiie empirical side of the
discussion.

^0 the extent that workers are not properly trained and motivated, technical inefficiency may
also be attributed to management. However, in the case of HARCs, management makes no
decisions regarding the training of workers. HARCs exist in large part to provide training to
farmers who have demonstrated motivation through political activism.

The first section of this chapter reviews the theoretical underpinnings and statistical
methodologies used to estimate and analyze efficiencies. The second section presents and
discusses the statistical results.

Productive Efficiency

The terms productivity and efficiency are often used interchangeably, but subtle
differences are noted in die contexts in which they are used and thus in their evolving definitions.
Productivity is defined, in its simplest form, as output obtained per unit of input. Productivity
measures are usually ratios of output to total or partial input. Such ratios are relative to each
other and thus cannot comprehensively differentiate sources of productivity changes. Measures
of total factor productivity (TFP), calculated as monetary values or as weighted combinations of
physical inputs, fail to distinguish differences in technology as well as the effectiveness with
which the technology is implemented.

Efficiency measures, by contrast, are derived by measuring the variation in the
input/output relationship to a technical maximum. That maximum is specified by a neo-classical
production function and thus represents the maximum output or frontier 1 jvel of output attainable
from a given set of inputs. The distance between the observed input/output relationship and the
frontier production function reveals inefficiencies associated with any input combination.

Frontier measurements of the observed technical maximum offer the most suitable vehicle
for accomplishing objective three^ in Chapter One of this study and illuminating policy options.
Productivity measures, because they are devoid of theoretical constructs and because they are

'Objective #3 is: Compare the technical and allocative efficiencies of individual production
systems vis ^ vis collective production systems.

often partial measures, do not offer adequate means to compare efficiencies across groups of
producers. A farmer wiio owns one donicey may appear more efficient than one who owns ten
even though the one-donkey owner has made gross overinvestments in machinery and equipment.
Frontier productions, on the other hand, simultaneously encompass all inputs in a theoretical
framework from which efficiency estimates may be derived.

The inclusion of all relevant factors, including human capital and institutions, conceivably
places everyone on the optimal frontier, rendering frontier and "average" functions
indistinguishable (Miiller, 1974). However, production functions can be reliably estimated in
terms of scarce material resources whose impact can be quantified and measured in marginal
terms. Human capital and institutions, on the other hand, while important to the production
process, do not lend themselves to precise evaluation for two reasons. First, they are a nebulous
concepts that cannot be described by cardinal numbers. Years of schooling and courses
completed yield exact numbers, but there is no way to calibrate the quantity and quality of
knowledge that actually contributes to production. Institutions that govern resource use are
important policy alternatives for improving the efficient use of scarce material resources, but are
similarly incapable of numeric characterization. Second, there is no rigorous theory to guide
analysis of the marginal relationships human capital and institutions hold with production.

Frontier functions are, however, useful tools in determining how human capital
investments and organizational alternatives directionally alter the efficient use of scarce resources.
Thus inquiry can be made into the human capital attributes and institutional parameters of
producers operating close to the frontier. Are they more educated? Does family background
inspire greater efficiency? Are they better trained and experienced? What rules govern their
actions?

Such information is useful to policy makers wanting to identify human resource
investments and rules and regulations which have the highest payoff. Knowledge of human
capital distinguishes human resource investments that enhance the "value of the ability to deal
with disequilibria" (Schultz, 1975) caused by changes in technology. Similarly, organizational
designs may be identified that contribute to the efficiency of over-all material resource use.

Technical Efficiency

The most widely used efficiency measures are rooted in the writings of Debreu (1951)
and Farrell (1957). The Debreu-Farrell measure of technical efficiency is defined as the
equiproportionate reduction of all inputs that produces a demonstrated optimal level of outputs.
Conventionally, it is the ratio of observed output to optimal output for a given set of inputs.
Thus, unity represents 100 percent efficiency and a fraction less than one indicates a measurable
level of inefficiency.

The conventional base within which efficiency is evaluated is the production technology.
Technology establishes the limits at which inputs are capable of producing given levels of output.
Let inputs x and outputs q be represented respectively by:

X = (xi, X., X3,...xJ e R"

q = (Qi, 02, q3,---qJ ^ R"-

The input requirement set of the production technology is
(4.1) l(q) = {x: (q, x) is attainable),

which represents all combinations of inputs, efficient and inefficient capable of producing q„.
R(q) is shown in Figure 4.1 as the shaded area.

Figure 4.1 Input requirement set

The boundary set of inputs in Kq) shows the least amount of inputs necessary to produce with
the current level of technology. Along the boundary, reduction in any input would reduce output
or require additional use of a substitute input in x. The boundary set is defined by the isoquant

(4.2) $(q) = {x: X e Itl(q) and Xx ^ R(q) if 0 < X < 1},

which excludes infeasible input combinations in R°. The concept of efficiency requires <l>(q) to
be convex, or at least quasi-convex relationship, as efficient input combinations use as little of
each X; as possible to produce q.

The Debreu-Farrell measure of technical efficiency can be formally interpreted as

(4.3) TE(q, x) = min{d\ Bx G a(q)} < 1."

Optimum efficiency yields a technical efficiency measure of unity, which is identical to the
isoquant

(4.4) $(q) = {x: TE(q, x) = 1}.

If one assumes only one product is produced, the production technology may be described
using a production function, and its associated isoquants. A prjduction function is a
mathematical form that relates the maximum possible output attainable from given quantities of
a set of inputs.

(4.5) q = q(x) = max{q: x € a(q)}.

The Debreu-Farrell technical efficiency measure is expressed by the ratio

(4.6) TE(q,x) = q/q(x).

The observed level of output, q, cannot be greater than the maximum level of output q(x),
delineated by the input-output combinations of the most efficient producer s. Clearly, then, TE(q,

"The Debreu-Farrell technical efficiency measure is the inverse of the distance function
(Shephard 1953, 1970) where

D(q, X,) =max{e: {xld) G a(q) > 1}.

x) < 1 because the production function is a technological frontier that can be achieved, but not
exceeded, by technically efficient producers.

AUocative Efficiency

Technical efficiency is derived solely from the input-output relationship; prices, and thus
any notion of cost minimizing behavior, are absent. AUocative efficiency, defined as the optimal
combination of inputs to produce a given level of output, is residually obtainable from cost-
minimizing frontier. Given input prices associated with the input vector x

(4.7) w = (w„w„W3,...wJ E R",
and a cost minimizing frontier is represented by

(4.8) c(q,w;T) = min,{w^x: I/TE(q,x;T) < 1}

where t is a vector of parameters representing optimum technology. The ratio of the frontier cost
function to the actual cost incurred yields a measure of economic efficiency (Farrell, 1957)

(4.9) EE = c(q,w;T)/x\v^

where x'^ is the vector of actual inputs and is the price vector. AUocative efficiency is the
ratio of economic efficiency to technical efficiency

(4.10) AE = EE/TE = wV/TE(q,x)).

AE < 1 as EE < 1 = TE*AE, economic efficiency can only be unity if full technical and
allocative efficiency are achieved.

Technical and allocative efficiencies are illustrated in Figure 4.2.

Figure 4.2 Farrell technical and allocative efficiency

The unit isoquant 1° represents a frontier production function utilizing inputs Xj and Xj. A
technically efficient producer is represented by B, which lies on the production frontier. A
producer operating at point B or any oUier point along the frontier cannot reduce any one input
without either increasing another input or reducing the level of output. Point A, on the other
hand, represents an inefficient producer, who utilizes more inputs than B to produce the same
level of unit output. The producer at point A can reduce input use without any reduction in the
unit level of output represented by 1°, The technical efficiency measure is then:
(4.11) TE = II B II / II All ■\

Many producers, given differences in managerial and work skills, are likely to fall short of the
technically efficient frontier. The amount by which a producer lies below the optimal production
frontier can be regarded as a measure of inefficiency and may be accounted for by human capital
and institutional differences.

The Debreu-Farrell technical efficiency is a "radial" measure in that, if the isoquant is
weakly convex, producers located on the portion of the isoquant where the slope is zero or
infinite are considered technically efficient. The Debreu-Farrell definition of technical efficiency
is thus not as restrictive as that proposed by Koopmans. Koopmans (1951) defined technical
efficiency as the state where increasing one output requires a decrease in another output or an
increase in at least one input; and the reduction of one input requires an increase in another input
or results in reduced output. Clearly, more efficiency is attainable if reducing one input results
in no reduction of output, a necessary condition for Koopmans, but rot for Debreu Farrell.
However, while slack* may pose some problems for mathematical programming estimates, it

'In vector notation || X || = (Sx;-)''^, vi.

*"Slack" refers to the range of an isoquant which may have a slope of zero or infinity. In
such a range, a producer may be considered technically efficient, even iiough he could reduce
one input quantity an maintain the same level of output.

does not hamper econometric techniques because functional forms (e.g. Cobb-Douglas) preclude
slack.

The concept of allocative efficiency, a measure of cost minimizing performance, is
depicted in Figure 4.2 as well. In order to minimize costs, production must be set at a level
where the ratio of input prices equals the marginal rate of technical substitution, or point E on
Figure 4.2. Allocative efficiency is measured by the distance separating the price line and the
efficient isoquant:

(4.12) AE = ||C||/||B|| .

Allocatively efficient producers adjust input mixes where the marginal rate of technical
substitution is equal to the price ratio. Producers can be technically efficient but allocatively
inefficient. Allocative inefficiency may be a result of management deficiency or it may appear
when input markets are distorted. Institutions are thus more important to allocative efficiency
than to technical efficiency. Both technical and allocative efficiency approach unity as they
achieve optimum or "frontier" efficiency.

Two empirical methodologies have predominated Debreu-Farrell efficiency measurement,
non-parametric frontiers and parametric (predominantly econometric'' frontiers. They are
discussed in the following two sections.

Nonparametric Frontiers

Farrell's approach (1957) is considered non-parametric and deterministic because the
convex hull of input-output ratios is constructed by mathematical programming techniques.
Mathematical programming techniques obtain the convex hull of the input requirement set that
represents the smallest input combinations for a given level of output. Data Envelopment
Analysis, a management science and operations research approach originally proposed by

Charnes, Cooper and Rhodes (1978, 1981) and recently discussed in Seiford and Thrall (1990),
dominate recent nonparametric applications.

Data envelopment analysis (DEA) was originally proposed as a technique for evaluating
the efficiency with which a group of operating units transforms inputs into outputs (Charnes,
Cooper, & Rhodes, 1978). DEA has been applied primarily to public sector institutions where
prices are absent or unreliable. Consequently, most DEA studies involve technical efficiency
only, although allocative efficiency can be calculated given sufficient price data.

DEA is formulated as a fractional linear program, continuing along the same math
programming path initiated by Farrell. In concept, the procedure maps input-output data to find
the subset of most efficient producers who comprise the frontier against which other producers
are compared. The most efficient units in the group define a production function that is linear
in a "piecewise" fashion. Input-output relationships are linear at each piece of the function
between efficient units, although they are not necessarily linear across all efficient units. The
function describes a hyperplane "efficient surface" equal in dimensions to the number of inputs
and outputs. Input-output relationships for the remaining units are then evaluated relative to this
efficient surface. DEA has always been an attractive alternative for measuring efficiency
because it imposes no functional form on the data.

The basic DEA approach is given by the specification of a transformation function T,
restricted by constant returns to scale and strong disposability:
(4.13) T = {(x,q):Xe<x, q<Qe, eeR^}

where x is an nxl vector of inputs, q is an mxl vector of outputs and V denotes the number of
producers. X is the nxk matrix of observed inputs and Q is the mxk matrix of observed outputs.
The vector 0 serves as a measure of intensity for any activity (x;, q;). Technical efficiency
measures for each producer i, are obtained by minimizing the ratio of xtual output to frontier

output subject to observed input/output relationships. They are calculated with mathematical
programming techniques:

(4.14) TE,(Xi,qi) = Min X.

St:

xe<x

Qe>qA

0eR%

where \ represents the level of inefficiency of the ith producer.

The program produces a scalar efficiency measure for each unit by selecting weights 0
that maximize the ratio of a linear combination of the unit's outputs to a linear combination of
its inputs. This efficiency measure is constrained so that the weights selected must be feasible
and cannot result in an efficiency ratio greater than that observed for the most efficient unit in
the group.

Later developments have unencumbered Farrell's original programming approach from
the assumptions of constant returns to scale (Banker, et.al., 1984) ana strong disposability of
inputs and outputs (Fare, et.al., 1985, 1987). Nonparametric frontiers are advantageous in that
they only require that the functional form of the technology be nondecreasing and concave. DEA
methods are particularly useful in modeling operational processes that do not conform to standard
market assumptions, such as in nonprofit firms or regulated industries. Nonparametric methods
may also be used to test for cost minimization or profit maximization (Varian, 1984) and have
demonstrated the potential for economies of scale that went undetected by econometric estimates
(Banker et al., 1986). However, nonparametric efficiency measures are severely limited by the
lack of statistical properties. Moreover, they attribute all measurement error to inefficiency,
allowing nothing for random uncontrollable events, and by the same token are very sensitive to
outliers.

Parametric Frontiers

The predominance of parametric frontiers employ statistical methods to analyze the
transformation of inputs into outputs. Prior to the emergence of frontier functions, the
conventional model that was estimated took the form

(4.15) q = q(x,T)-e

where q(x,T) is the production function, q and x are vectors of outputs and inputs respectively,
T represents technology and e is the random error. OLS necessarily assumes the expected value
of the disturbance term, e, is zero because it estimates parameters of variables by minimizing the
sum of the squared errors. However, neo-classical production theory defines the production
function as the maximum output obtainable from a given set of inputs. In the absence of random
error, e > 0 because observed levels of output cannot exceed the theor'3tical maximum.

Aigner and Chu (1968) proposed a "parametric deterministic" procedure to calculate the
frontier with mathematical programming techniques. They generalized a function with a one-
sided error term which required all output levels to lie on or below the calculated frontier.

(4.16) q < q(x;^)

where j3 represents the frontier "estimates". The resulting linear programming function took the
form:

(4.17) '=1

s.t.

i 0 i = i,..,«

p ^ 0.

The quadratic formula is the square of the bracketed term of the objective function. The measure
of inefficiency is given by the ratio of the actual level of output to the frontier level of output.

Although the programming approach yields parameters, it precludes the testing of
statistical confidence in that no standard errors can be computed. The estimation procedure also
imposes a structure on the technology and is sensitive to outliers.

Schmidt (1976) showed that OLS estimation of Aigner and Chu's formulation yields best
linear unbiased estimates of the slope coefficients, but not of the intercept. He also showed that
Aigner and Chu's linear programming estimates are maximum likelihood if the error is non-
negative and has an exponential distribution

(4.18) f^e) = -exp(-«/(p) tfiO

where <p is the distributional mean and is the variance. A half-normal distribution of the
(non-negative) error yields maximum likelihood estimates for the quadratic programming
technique (Schmidt. 1976):

(4.19) fie)—^ejj>i-e'l2(^)

However, Schmidt acknowledged that both maximum likelihood estimators violate the regularity
conditions in that the range of the observed dependent variable is depeident on the parameters
being estimated.

A major advantage of estimating frontiers with econometric techniques is that they render
statistical properties to efficiency measurements. Parametric frontie: estimations impose a
structural form on the technology, but unlike nonparametric methods they provide statistical
measures, account for uncontrollable shocks and are less vulnerable to outliers. Early parametric
techniques (Schmidt, 1976; see also Fersund et al., 1980) yielded "full 'rontier" measures that,
like nonparametric measures, attributed all deviations from the frontier to inefficiency (e ^ 0).

Attributing all deviation from the frontier is unrealistic in that it does not account for
random uncontrollable events beyond the purview of management. Tne "stochastic frontier"
(Aigner Lovell and Schmidt. 1977; Battese and Corra, 1977; and Meeusen and van den Broeck,
1977) allows for random deviation from the frontier owed to measurement error or events beyond
the control of the producer. The error term of the production functiori (4.5) in the stochastic
frontier is comprised of two components:
(4.20) e = {V- u)

where v has a symmetric distribution which captures random effects and exogenous shocks across
firms; and the one-sided error, « > 0, captures technical efficiency of a firm relative to the
stochastic frontier. Thus the estimated frontier accounts for stochastic characteristics that are

likely to aifect any production system, isolating systematic effects in the measurement of technical
inefficiency.

If u is assumed to have a half-normal distribution the associated log-likelihood function

(4-21) ^M,a,X) = -Mna-K + ^[lnT(-^)-^(^)^

where X = aja,, a- = a^-la,-, and is the cumulative distribution function of the standard
normal distribution. As ^ <» , X ^ 0, systematic inefficiency increases relative to random
inefficiency.

Assuming m is exponentially distributed yields the likelihood function
(4.22) _^

which is parametized in <p and a^.

Although Aigner et al. (1977) characterized the variances of w and v within the residual
e, they were not able to break the residual into its two components for each observation.
Efficiency scores were calculated as averages for the entire sample where a„ = V{2/Tr).
Decomposition of the variances for each observation, a distinguishing attribute of mathematical
programming techniques, remained beyond the scope of statistically generated frontiers until
Jondrow, Lovell. Materov and Schmidt (1982) derived the conditional distribution (M; | e). By

specifying a functional form for the distribution of u given the composed error term e, Jondrow
et al. demonstrated that point estimates of efficiency are obtainable for each observation. The
expressions for the expectation of u given e of the half-normal and exponential models are

(4.23) EluM-^l-^^^^-^} and

(4.24) £[„|,i = (e.-,a,^ + M^5^L:l^^ respectively.

T[(«,-<Po^K

These indirect measures of u are unbiased. However, they are not ccnsistent because with a
mean truncated at zero, the variance of the coefficients can never be zeio.

Stochastic frontiers have been used in LDC's to measure the effectiveness of credit
programs (Ekanayake, 1987; and Taylor, Drummond and Gomez, 1986). Several studies
examined extension programs (Kalirajin and Shand, 1985; Kalirajan, 1984; Kalirajan and Finn,
1983; and Bravo-Ureta and Evenson. 1994) and education (Kalirajan, 1990; and Pinheiro, 1992).
The stochastic frontier has also been used to identify firm and managerial characteristics that
influence efficiency (Seale, 1990).

Technical Efficiency vis ^ vis Technology Adoption

A philosophical distinction needs to be made regarding technology in the empirical
examination of technology adoption and technology in a production frontier. The previous
chapter examined technology adoption and the factors that influence it. Certain IPM technologies

were identified as superior based on engineering designs and experiments. Technical efficiency
is based theoretically on the same concept regarding input-output relationships. However,
technical efficiency is examined based on the observed best practice among farmers in the
sample. It is possible then that farmers appear to achieve optimum efficiency even though they
did not employ the optimum possible technology because they use fewer of the inputs of
suboptimal technologies. Graphically, the actual isoquant may lie between the best practice
isoquant 1° and the origin in Figure 4.2.

Most technical efficiency studies recognize that it is virtually imoossible to construct the
technically efficient frontier from engineering knowledge. Even simple agricultural production
systems are too complex. It was that insurmountable challenge that lead Michael Farrell (1957)
to propose the construction of the isoquant based on the observations of best practice producers.
The only assumption necessary in input-input space is convexity, which is virtually synonymous
with efficiency.

Technology adoption studies can assume recommended technologies are optimal because
they focus on specific, comprehensible aspects of production. To the extent to which
technologies are developed and recommended based on a broad assessment of all inputs available
to producers, and the most efficient producers adopt those technologies, the observed frontier and
the actual or potential frontier are identical. The MIPH program endeavored to design programs
that both incorporate farmers' available inputs and to communicate them to farmers. The IPM
technologies developed by MIPH are relatively more comprehensive than most in that they
incorporate several production facets related to pest control. However, MIPH technologies
carmot represent the entire gamut of possibilities available to farmers.

In sum, the coefficients on technology adoption (3.3) and the coefficients on the frontier
production functions in the following sections of this chapter have slightly different interpretations

with respect to technology. The former refers to available technology as determined by
engineering studies related directly to the physical input-output relationship; the latter refers to
an observed technological optimum as demonstrated by "best practice" producers.

The HARC Stochastic Frontier

Most problems associated with parametric frontiers concern the data to which the method
is applied. Relevant variables concerning human capital and institutional characteristics are rarely
available. When relevant variables are available, they often cannot be included in the estimations
because they present degrees of freedom problems due to limited samples.

Field surveying for this study was carried out in a manner designed to overcome these
problems. Data were gathered on several aspects of HARC operations to expand the explanatory
power of the models and sufficient observations were obtained to avoid problems with degrees
of freedom. The stochastic frontier function thus appears to be the best suited for evaluating
various aspects of HARC efficiency.

Standard criticisms of technical efficiency methods (Milon, 1987) do not apply to HARCs
or the environment in which they operate. Contractual relations, with the exception of internal
labor contracts which are documented, do not vary across HARCs, unmarketed factor inputs are
included in the analysis and the means and ends of the HARCs are arguably homogeneous.
Externalities, while important to broader welfare considerations than considered here, would not
likely have much of an influence on efficiency measurements because harmful inputs are not used
nearly as extensively in HARC basic grain production as they are in developed countries.

Data on collective and individual production systems were u^ed to estimate HARC
frontier parameters for maize production. The Cobb-Douglas model is selected as the functional
form for its convenient properties. The general form of the Cobb-Douglas is

k m n

(4.25) q ' AY[x^'Y[h:'Y[c':'u

i=l 1=1 j=l

where q is a producer's output, A is a given level of technology which "shifts" the ftinction in
response to technological changes, represents the set of i = l...n inputs and the fij's are the
corresponding input coefficients. The standard production function estimates output q, solely as
a function of physical inputs x^. However. Jensen and Meckling {\919^ suggested an extended
form of the production function which recognized that production did not occur in a physical
vacuum. Knowledge h, (human capital) and "organizational forms" O; also influence the level of
output by their parameters and y-^ respectively.

The Cobb-Douglas has several convenient properties. and 52/3,= 1 the form

is concave. Thus, assuming the firm minimizes costs and factor supply and product demand
functions are continuously differentiable on their domains, the input denand and output supply
functions are continuously differentiable everywhere on their respective domains, a very useful
property for interpreting results. The Cobb-Douglas is homogeneous and thus provides a means
for examining returns to scale in that 52/3i= 1 characterizes constant reiurns to scale, 52/3; > 1,
increasing returns to scale; and 52/3i< 1, decreasing returns to scale. However, the elasticity of
substitution remains unity for all levels of output, weakening scale obser'ations. Most important
for this study, the dual cost function, necessary for the calculation of allocative efficiencies, can
be derived directly from the Cobb-Douglas production function.

Although considered restrictive in some instances, the Cobb-Douglas was developed for
and has been used extensively in agriculture in both developed and developing countries.

Moreover, functional form has been shown to have minimal impact on efficiency estimates (Kopp
and Smith, 1980).

The systematic element is seen in the right-hand side of 4.25 in that ^ represents one-
sided efficiency disturbance :

k m n

(4.26) g = AH xf'H ^/'« " « ^^"^^

i=l j=l i=l

and q* frontier output. The specific model estimated for maize production is:

(4.27) InMaize = (3, + l3,\nLand + p.^nLabor + ^^\nSeed + ^^InFertilizer +
^^XnHerbicide + jS^lnLandprep + ^jCollectiviry + ^^Paratso Region +
PJLecture + ^.oPublicatio + ^.^Lectureaid + ^^Xecturepub + e

where:

Variable

Coefficient

Tecnology (A)

Constant

Land

Land measured in manzanas*

Labor

Labor measured in work days

Seed

Seed measured in pounds

Fertilizer

Fertilizer measured in quintals

Herbicide

Herbicide measured in pounds

Landprep

Total cost of land preparation

Collectivity

Degree of collective work arrangements"

Paraiso Region

= 1 if producer is from the region of El Parafso, 0

otherwise.

Lecture

- 1 if group received extension lectures without

additional teaching aids, 0 otherwise

Publication

= 1 if group received printed extension publications and

no personal lecture, 0 otherwise

Lectureaid = 1 if group received lectures accompanied by electronic

visual aids, 0 otherwise

Lecturepub = 1 if group received both lectures and printed extension

publications, 0 otherwise

'Manzana = 0.705 hectare

"Parcels used completely in the collective mode are scored as one, those planted prior to jarcelization are scored as one
half, and those for which the only collective activity land preparation are scored as one fourth. Completely individual
production is registered as zero.

is the constant term on the technology variable A in 4.24. Different levels of
technology "shift" the function. Land, Labor, Seed, Fertilizer, Herbicide, and Land Preparation,
represent continuous variable inputs and thus are in log form.

Human capital and organizational form variables are included in the production function
because they may have a direct impact (Battese, Coelli and Colby, 1989). All extension
techniques are included in the model as dummy variables. The variabl j for the control group,
which received no extension assistance, is necessarily excluded to avoid a singular matrix.
Collectivity, the variable representing organizational form (Jensen and Meckling, 1979), is
calibrated according to the point at which collective operations are yielded to the individual
responsibility of each HARC member. In some HARCs land is prepared collectively, but
planting and all subsequent cultivation is conducted individually. A few HARCs with large
individual parcels do not partition land until planting and initial applications of fertilizer are
completed. The Collectivity variable is included in the model for maize to provide additional
means of examining the extent to which collectivization at various degrees influences production.

Production functions are estimated with the maximum likelihood technique (equations
4.20 and 4.21). The half-normal and exponential distributions are assumed for the one-sided
error. The distinctive effect each distribution has on the frontier is not well known (Bauer,
1990), but Greene (1990) suggests that there is not much difference between the two. Maximum

likelihood estimates and technical and allocative efficiencies were estimated using the LIMDEP
software program. Technical efficiencies from 4.24, are:

Allocative efficiency (4.10) is calculated by analytically deriving the dual cost frontier
(Kopp and Diewert (1982) and Bravo-Ureta and Rieger (1991)) to obtain a measure of economic
efficiency (4.9). It is not necessary to estimate the cost function as a regression equation.
Rather, the coefficients from the production function are incorporated into the cost function which
is a dual representation of the production function.

Total cost is a function of input prices and output, the minimization of the costs of
producing given levels of output. The cost function reveals all the economically relevant
information about the technology (Shephard, 1970; Cornes, 1992). Varying price vectors reveal,
through the assumptions of cost minimization and convexity, ranges of input mixes that are
observed technically efficient. The dual cost frontier is:

The cost function parameters a and m, are analytically derived directly from the estimated
parameters of the production function (4.24) where:

(4.26)

(4.27)

(4.28)

, Jk=^[in..pf']-'".

Results

Information on the study area and data are in Appendix I. The human capital survey is
in Appendix II. Ordinary least squares (OLS) estimates are displayed on Table 4. 1 . Tables 4.2
and 4.3 display maximum likelihood (ML) estimates of the stochastic frontier where half normal
and exponential distributions are assumed for the truncated distribution component, (m). The
Cobb-Douglas model fits the maize production data well. The of the OLS is 0.88. All but
one of the standard physical input variables, herbicide, are significant at the 0.01 probability level
for all three regressions.

The value of X = aja, is 5.1 and significant at the 0.05 level. This suggests that
relatively more of the variation in the model is attributed to random, not systematic influences.
As X approaches infinity, the average and frontier functions converge

Coefficients of the Cobb-Douglas production function represent output elasticities for each
input. The average function indicates that a one percent increase in land, ceteris paribus, would
generate a 0.46 percent increase in output. Frontier estimates indicate a similar increase in land
would yield a 0.56 increase in output, 0.09 higher than the average. The coefficient on Seed is
higher in the average function than in the frontier functions, though the difference is less notable.
There appears no appreciable difference between average and frontier functions for the
coefficients on Labor, Fertilizer, Herbicide, and Land Preparation.

The variables Collectivity and Paraiso Region are positive and significant. The
parameters on extension variables are inconsistent with the results of those estimated in the
technology adoption model of the previous chapter. Lecture and Publication and Publication
only, the only two extension variables that were not significant in the logit regression that
measured technology adoption, are both positive and significant in the frontier function.

Table 4.1

Average function: Maize
ordinary least squares regression

Variable

Coefficient Std

. Error

t-ratic

Prob|t| >x

Constant

2.295

0.231

9.938

0.000

Land

0.464

0.066

7.028

0.000

Labor

0.129

0.039

3.287

0.001

Seed

0.175

0.058

3.010

0.003

Fei^ilizer

0.035

0.012

2.839

0.004

Herbicide

0.016

0.007

2.2.12

0.026

Land Preparation

0.044

0.017

2.533

0.011

Collectivity

0.112

0.016

6.900

0.000

Paraiso Region

0. 151

0.041

3.691

O.OUU

Lecture

0.052

0.060

0.861

0.389

Publication

0.212

0.069

3.055

0.002

Lecture and Visual Aids

0.039

0.058

0.672

0.501

Lecture and Publication

0.171

0.062

2.756

0.006

Observations:

405

R-squared:

0.877

Adjusted R-squared:

0.873

F[ 12, 392]:

233.246

Log-likelihood:

-153.314

Restr.(fi

= 0) Log-1-

-577.919

Amemiya Pr. Criter.:

0.821

Akaike Info.Crit.:

0.133

Table 4.2

Frontier function: Maize
maximum lilcelihood estimates
half normal distribution

Variable

Coefficient

Std. Error

t-ratio

Prob|t| >x

Constant

2.806

0. 194

r\ AAA

Land

0.556

0.052

10.784

A AAA

0.000

Labor

0.122

0.028

4.317

A AAA

0.000

Seed

0.116

0.043

2.690

A AAT

0.007

Fertilizer

0.023

0.009

2.540

A A 1 1

0.01 1

Herbicide

0.011

0.006

1.693

A AAA

0.090

Land Preparation

0.049

0.013

3.738

A AAA

0.000

Collectivity

0.085

0.014

5.997

A AAA

0.000

Paraiso Region

0.099

0.034

2.872

0.004

Lecture

0.020

0.059

0.336

0.737

Publication

0.129

0.062

2.088

0.037

Lectureaid

0.093

0.054

1.717

0.086

Lecture and Publications

0.131

0.059

2.209

0.027

2.856

4.057

0.704

0.481

<ni/(Tv

5.098

2.400

2.124

0.034

Va^v + ff^u

1.031

0.526

1.961

0.050

Log-Likelihood:

-117.0200

Variance components: a^(v) = 0.03935 ff^(u) = 1.02273

Table 4.3

Frontier function: Maize
maximum lilcelihood estimates
exponential distribution

Variable

Coefficient

Std. Error

t-ratio

Prob|t| >x

Constant

2.800

r\ 1 TO

0. 176

n (\c\t\
U.UUU

Land

0.559

0.049

11.360

A AAA
U.UUU

Labor

0.123

0.027

4.557

A AAA
U.UUU

Seed

0.115

0.042

1.151

A AA/C

U.UUo

Fertilizer

0.022

0.009

O CI 1

2.511

Ann
U.Ulz

Herbicide

0.010

0.006

1 /;oo
1.O50

A AQ1

u.uy 1

Land Preparation

0.050

A A 1 '5

0.013

j.y^i

A AAA
U.UUU

Collectivity

0.086

0.014

6.258

0.000

Paraiso Region

0.095

0.033

2.854

0.004

Lecture

0.015

0.056

0.271

0.787

Publication

0.125

0.060

2.039

0.037

Lecture and Visual Aids

0.097

0.053

1.830

0.067

Lecture and Publication

0.127

0.057

2.230

0.026

3.524

0.280

12.:'75

0.000

(TV

0.198

0.017

11.547

0.000

Log-Likelihood:

Variance components: a^(v)

-114.7641
= 0.03907

a^(u) = 0.08053

It would be imprudent to argue that any of these dummy variable estimates represent
precise measurements of the influence each bears on production. However, they do provide
valuable directional indicators. Thus the absolute values are less relevant than the sign of the
variables or relative extremities.

Technical and AUocative Efficiencies

Technical and allocative efficiency measures are presented in Tables 4.4 and 4.5.
Collective efficiencies are the calculated efficiency measures for the collective parcel of each
HARC, and individual parcel efficiencies are presented as averages for each HARC. The
standard deviations of individual technical efficiency averages are less than a third of the average
for all but two cases, suggesting that technical eftlciency does not vary substantially within
HARCs. The uniformity of efficiencies within HARCs may be explained by the communication
provided by cooperatives as they are in part established to facilitate communication across large
numbers of farmers. Empirical evidence (Martin and Taylor, 1995) attests to the facilitating role
cooperatives play in communication. It was also observed throughout the course of fieldwork
that new inputs and new techniques were duplicated by other farmers within HARCs, in some
cases reenforcing errors.

The most salient feature regarding the efficiency measures is that individual parcels are
no more efficient than collective parcels. In fact, efficiencies based on the half normal (Table
4.4) and exponential (Table 4.5) distributions show that collective parcels are more technically
efficient than individual parcels for 11 of the 16 HARCs that employed both modes of
production. Thus one of the greatest theoretical arguments, and easily '^he most touted political
arguments against collective forms of enterprise, shirking, shows no empirical basis.

Table 4.4

Technical and allocative efficiencies
for maize
half normal truncated distribution

Technical Efficiency Allocative Efficiency

Unpaid Labor
w=0 w=5

HARC Individual Collective Individual Individual Collective

Ideas en Marcha

.80

.37

.42

(.07)'

(.10)

El Boqueron

.41

.78

.08

.09

.24

(.16)

(.09)

Empalizada

.71

.87

.30

.32

(.15)

(.24)

(.23)

El Benque

.71

.18

.22

(.19)

(.13)

(.15)

Los Bienvenidos

.76

.91

.14

.20

.47

(.13)

(.11)

(.09)

El Esfuerzo

.81

.33

(.06)

(.05)

Los Peregrinos

.J J

.jj

(.08)

(.12)

(.10)

Esquilinchuche

.79

.30

.37

(.19)

(.20)

San Nicolas

.52

.50

.14

.17

.13

(.55)

(.18)

(.23)

Los Almendros

.70

.79

.15

.24

.38

(.10)

(.11)

(.07)

La Esperanza

.73

.79

.17

.24

(.14)

(.13)

(.12)

Santa Cruz

.77

.28

.37

(.11)

(.15)

Cayo Blanco

.75

.84

.10

.12

.25

(.14)

(.06)

Zopilotepe

.79

.24

Guaymuras

.91

.42

Table 4.4

Technical Efficiency

HARC Individual Collective

La Concepcion

a 1

(. 10)

c 1 n

( OR)

San Juan de Linaca

.OJ

on
.yu

. jj

(.(JO)

( \2)

L,a rllZUnCd

. / o

( 09.)

( 09)

1 empiscapa

C 08">

La rroviaencia

.00

.JO

( \6)

19 de Abril

.70

.74

.16

1 o

.18

.26

(.21)

(.11)

(.10)

El Coyolar

.86

.32

.37

.36

.05

(.07)

(.08)

El Plomo

.77

.81

.22

.20

.29

(.14)

(.12)

(.07)

Los Dos Naranjos

.82

.87

.31

.43

(.06)

(.05)

(.06)

Los Venecianos

.76

.21

.22

(.11)

(.12)

La Libertad

.72

.54

.19

.10

(.15)

(.12)

(.11)

Montanuelas

.80

.34

Ailocative Efficiency

Unpaid Labor
w=0 w=5
Individual Individual Collective

' Standard errors are in parentheses.

Table 4.5

Technical and allocative efficiencies
for maize
exponential truncated distribution

HARC

Technical Efficiency

Individual

Collective

Allocative Efficiency
Unpaid Labor
w=0 w=5
Individual Individual Collective

Ideas en Marcha
El Boqueron
Empalizada
El Benque
Los Bienvenidos
El Esfuerzo
Los Peregrinos
Esquilinchuche
San Nicolas
Los Almendros
La Esperanza
Santa Cruz
Cayo Blanco
Zopilotepe
Guaymuras
La Concepcion

.82
(.06)'

.41
(.16)

.72
(.15)

.72
(.20)

.77

(.13)

.82
(.05)

.79
(.07)

.80
(.19)

.52
(.55)

.71
(.10)

.74
(.14)

.79
(.11)

.76
(.14)

.82
(.10)

.79
.87

.91

.78

.51
.80
.79

.84
.80
.91
.92

.46
(.09)

.11
(.12)

.37
(.24)

.23
(.14)

.17
(.13)

.41
(.05)

.39
(.13)

.34
(.21)

.15
(.20)

.20
(.14)

.22
(.15)

.34

(.17)
.12
(.08)

.52

(.08)

.12
(.12)

.40
(.23)

.27
(.16)

.25

(.11)
.41

(.05)

.45
(.09)

.42
(.21)

.18
(.26)

.32
(.09)

.31
(.12)

.45
(.14)

.14
(.06)

.31
(.12)

.37
(.08)

.31
.38

.51

.46

.18
.48
.32

.31
.31
.46
.51

Table 4.5 84

Technical Efficiency Ailocative Efficiency

Unpaid Labor
w=0 w=5

HARC Individual Collective Individual Individual Collective

San Juan de Linaca

.86

.91

.38

CQ
.DO

(.06)

(.16)

(.13)

La Puzunca

.80

.30

.35

(.08)

(.13)

(.08)

Tempiscapa

.75

.25

.22

(-12)

(.10)

(.08)

La Providencia

.69

.56

.24

.29

.23

(.22)

(.18)

(.17)

19 de Abril

.71

.76

.20

.23

.36

(.21)

(.13)

(.11)

El Coyolar

.87

.32

.44

.43

.06

(.06)

(.07)

(.08)

El Plomo

.79

.82

.27

.24

.36

(.14)

(.13)

(.07)

Los Dos Naranjos

.83

.88

.38

.49

(.05)

Los Venecianos

.78

.28

.27

(.10)

(.13)

La Libertad

.74

.55

.24

.15

(.14)

(.12)

Montaiiuelas

.81

.43

' Standard errors are in parentheses

Two of the five remaining HARCs show individual parcels are only scarcely higher.
Individual technical efficiencies for Los Peregrinos and San Nicholas (the only for which the
standard error is higher than the average) exceed their collective measures by one and two points
respectively. Differences are much greater in the remaining cases where collectives are more
technically efficient; at least nine points for seven HARCs, two show five point differences and
the remaining two HARCs register differences of four points.

Allocative efficiencies are markedly lower than technical efficiencies for both collective
and individual systems, and vary proportionately across HARCs with technical efficiencies.
Curiously, allocative efficiencies increase for 16 of the HARC individual production systems, in
both the half-normal and exponential distributions, when the standard wage of five lempiras is
imputed for free labor.' The average allocative efficiency for the imputed wage is 0.05 greater
than the same average when no wage is imputed, a difference that is significant at the .01 level
of probability. Higher allocative efficiencies for the case of imputed wages suggests that there
is an opportunity cost for labor on individual parcels vis k vis other opportunities available to
farmers. If labor had been over-employed on individual parcels, allocative efficiencies would
decrease when the standard wage is imputed. It would suggest that the shadow price of labor for
HARC households is less than the average wage.

This result is somewhat contrary to that of Nguyen and Martinez (1979), who found that
productivity of the ejido sector in Mexico declines when the market wage is imputed for free
labor. The difference here is that allocative efficiency is a more precise measure, reflecting

'Since paid and hired labor was aggregated into one input, wage rates were calculated as total
cost of labor divided by the amount of both free and hired labor. When all labor was free a
nominal .01 value, .002% of the standard L5.00 wage rate, was imputed for all free labor as it
would be mathematically impossible to calculate allocative efficiency with a zero value for any
free input. It can be considered a minor opportunity cost.

optimum input mixes as opposed to monetary input-output relationships. It may be that HARC
members have competing coop-related responsibilities or opportunities that preclude them from
devoting free labor to individual parcels. Work outside the cooperative is limited in rural
Honduras.

Averages of technical and allocative efficiency differences between collective and
individual systems for all HARCs and only those with mixed systems are displayed on Table 4.6.

Table 4.6 Differences' in efficiency averages between collective and individual parcels

Mixed* HARCs All HARCs

Half Exp Half Exp

Technical Efficiency

Difference 0.00 -0.00 -0.02 -0.02

(0.01)^ (0.06) (0.55) (0.66)

Allocative Efficiency
wage 0

Difference 0.09 0.08 0.06 0.05

(1.82**) (1.53*) (1.32*1 (1.03)

wage = L5.00

Difference 0.04 0.03 0.01 -0.00
(0.86) (0.59) (0.19) (0.05)

' Collective average less individual average

^ Efficiency scores exclusively for HARCs that had both individual and collective or "mixed" production systems.

' t statistics are in parentheses

" Significant at the level of . 1 probability level.

~ Significant at the level of .05 probability level.

There is, on average, no statistically significant difference in technical efficiency between
collective and individual parcels. The only significant difference in mean efficiency scores occurs
in allocative efficiency when free labor receives no direct remuneration. Collective parcels in
this instance are more allocatively efficient. The significance is attributed to the low level of
allocative efficiency when free labor is not imputed a wage.

Summary

The most significant result of this chapter is that collectivs parcels appear more
technically and allocatively efficient than individual parcels. The chapter begins by reviewing
the theoretical and empirical developments of the Debreu-Farrell efficiency measures. A frontier
production function is estimated, rather than a conventional production function, because the
former reveals the observed maximum that provides a benchmark against which efficiency can
be measured. Three functions are estimated, an average OLS function and two maximum
likelihood functions, one with a half-normal distribution and another with an exponential
distribution. The estimated frontier function has a two component error that differentiates
random (stochastic) error from systematic (inefficiency) error.

The explanatory value of all three models is high. All but one of the coefficients of the
average function are similar to those of the frontier functions. The land coefficient is higher in
the frontier function than in the average function, suggesting that the most efficient producers
obtain a higher return from land than most producers. Collectivization ';ontributes positively to
production, as the collectivity variable is positive and significant.

Technical efficiency is calculated based on the most efficient input-output relationship
revealed by the frontier. Allocative efficiency, a measure of optimum resource allocation, is
calculated based on input prices vis ^ vis the frontier. The results challenge conventional wisdom

in that collective producers appear to be more technically and allocatively efficient than individual
producers. More important, the results indicate more precisely the nature of HARC failure. The
main problem appears attributable more to managerial problems (Jensen and Meckling 1979) than
to the popular notion of "shirking" (Alchian and Demsetz, 1972).

Finally, individual producers are more allocatively efficient when a standard wage is
imputed for free labor, indicating that there is an opportunity cost for labor devoted to individual
parcels. Collective allocative efficiency is also significantly higher than allocative efficiency of
individual producers when labor is imputed a standard wage - a significance that disappears when
the wage is not imputed.

CHAPTER 5

TRADITIONAL AND ADVANCED TECHNOLOGY:
A COMPARISON OF BEANS AND MAIZE

Although maize is a crop rooted in ancient Central American tradition, and is even a
central focus of the Mayan religion, technical aspects of maize production have been modified
due to land constraints and accessibility of new technologies. Current production processes of
maize are much different than those developed by indigenous civilizations. Machinery is used at
various levels - tilling, seeding, spraying and, though not in harvesting, usually in shelling.
Hybrid seeds, which require supplemental fertilizer and pesticide inputs, as well as advanced
storage, are in routine use. Much of the input mix for corn production is directly dependent on
input distribution systems, the malfunctioning of which can reduce allocative efficiency.

Bean production, on the odier hand, still resembles the processes developed centuries ago
and uses relatively few inputs. The principle inputs are land, labor and seeds, most of which are
available within the family farm. Beans are usually planted in postrera vith a long wooden stick
called a barreta between rows of drying corn plants. Corn stalks serve as poles on which bean
vines can be strung to dry and to enhance photosynthesis. Bean production also restores nitrogen
to the soil which is valuable for the next year's corn production. Bsyond being agronomic
complements, maize and beans are nutritional complements. They supply more protein when
consumed together than the sum of their individual protein contents. Maize and beans form the
basic staples of the Honduran diet.

This chapter presents production function estimates of beans parallel to those of maize
in the previous chapter. Technical and allocative efficiencies for bean production are also

presented. Unlike in the case of maize, beans are produced exclusively on individual parcels;
no comparisons can be made with respect to collective production.

The main purpose of this chapter is to compare the results of bean production efficiencies
with those of maize to draw policy insights relevant to technology and input markets. It is
hypoUiesized that technical efficiencies will be higher for beans than for maize because bean
production technologies are more traditional relative to those of maize. It is further hypothesized
diat allocative efficiencies will be higher for beans than for maize because bean production relies
on fewer inputs that do not depend on input markets.

Beans: A Traditional Crop

The Cobb-Douglas form, which was used in the case of maize, is also used for beans.
The general form of the Cobb-Douglas is:

i=l i=l

where q is output, A is a given level of technology which "shifts" the function in response to
technological changes, x, represents the set of i = l...n inputs, h^ represents human capital and
the fiiS and a|S are the corresponding coefficients.

As in the case of maize, the Cobb-Douglas form is estimated usmg cross-sectional bean
data (4.26). The simpler technology employed in bean production is reflected in the production
function:

(5.2) InBeans =

where:
Variable

Technology (A)
Land
Labor
Seed

Paraiso Region
Lecture
Publication
Lectureaid
Lecturepub

/3„ + ^^inLand + ^.InLabor + ^^XnSeed + ^J^aralso Region +
^^Lecture Only + ^J^ublication Only + ^jLecture and Visual Aids +
ff^cture aiui Publication + e

Coefficient
Constant

Land measured in manzanas'
Labor measured in work days
Seed measured in pounds

= 1 if producer is from the region of El Parafso, 0
otherwise.

= 1 if group received extension lectures without
additional teaching aids, 0 otherwise

= 1 if group received printed extension publications and
no personal lecture, 0 otherwise

= 1 if group received lectures accompanied by electronic
visual aids, 0 otherwise

= 1 if group received both lectures and printed extension
publications, 0 otherwise

* Manzana = 0.705 hectares

The variables for beans are similar to those for maize. ^„ is the constant term on the
technology variable A in 5.2. Land, Labor and Seed represent continuous variable inputs and
thus are in log form. All extension techniques are included in the model as dummy variables.

Average and frontier functions are displayed on the following three tables (5.1 - 5.3).
Coefficients on the physical inputs of land, labor and seed are positive and significant for average
and frontier estimations. The difference between the frontier and the average functions is less
apparent for beans than for maize; aja^. is insignificant. Bean cycles are unpredictable in
Honduras, influenced significantly by drought and floods and hence much more encumbered by
risk and uncertainty than maize.

A notable distinction between maize and bean functions appears in the relative magnitudes
of the labor and land coeftlcients. The elasticity of labor with respect to output is much higher
in the case of beans than that of land. Beans are grown in postrera when seasonal demands for
coffee harvesting are high. The relatively high labor elasticity value may also be explained by
the risky nature of bean production. Farmers expressed the challenges associated with growing
beans brought on by erratic weather from one year to the next. The year the data were gathered,
rainfall was considered fair-to-good. Risk-averse farmers may have sought alternative forms of
employment because annual returns to labor in bean production have been, on average, much
lower.

The extension variables demonstrate the same pattern that emerged in the technology
adoption logit regression in Chapter three. All the extension coefficients that involve personal
contact are positive and significant at the five percent level for the average function. However,
Publication is not significant in any regression, and Lecturepub is not significant in the frontier
functions. These results are contrary to those in the case of maize.

Technical and allocative efficiencies for beans are displayed on Table 5.4. All efficiency
scores are given by HARC as averages of individual producers.

Table 5.1

Average function: Beans
ordinary least squares regression

Variable

Coefficient

Std. Error t-ratio

Prob 1 1 1 > X

Constant

-1.836

0.410

-4.473

0.000

Land

0.165

0.085

1.935

0.053

Labor

0.624

0.083

7.476

0.000

Seed

0.239

0.092

2.586

0.010

Lecture

0.544

0.110

4.947

0.000

Publication

0.238

0.132

1.802

0.072

Lecturepub

0.229

0.110

2.093

0.036

Lectureaid

0.457

0.088

5.211

0.000

Paraiso Region

-0. 142

0.090

-1.582

0.114

Observations:
R-squared:
F[ 8, 169]:
Log-likelihood:
Amemiya Pr. Criter.

178

0.642 Adjusted R-squared:
37.830

-103.018 Restr.(fl=0) Log-1:

1.259 Akaike Info.Crit.:

0.625

-194.359
0.206

Table 5.2 Frontier function: Beans

maximum likelihood estimates
half normal distribution

Variable

Coefficient

Std. Error

t-ratio

Probit! >x

Constant

-L331

U.Oo4

U.UjZ

Land

0.190

n f\oo

O.Ooo

o 1 *n
Z.lT) 1

n (Yx 1

Labor

0.616

0.079

n non

l.lol

n C\C\C\

u.uuu

Seed

0.226

0.100

2.250

0.024

Lecture

0.493

0.123

4.013

0.000

Publication

0.175

0.174

1.007

0.314

Lecturepub

0.181

0.106

1.708

0.088

Lectureaid

0.429

0.083

5.157

0.000

Paraiso Region

-0.149

0.091

-1.638

0.101

-0.253

4.687

-0.054

0.957

OU/ffV

1.276

0.980

1.302

0.193

V ff^v + a^u

0.534

0.398

1.343

0.179

Log-Likelihood:
Variance components:

-101.8082
(t2(v) = 0.10864 ff2(u)

= 0.17695

Table 5.3

Frontier function: Beans
maximum likelihood estimates
exponential distribution

Variable Coefficient Std. Error t-ratio Prob 1 1 1 > x

-1.452

0.403

-3.601

0.000

Land

0.188

0.087

2.160

0.031

Labor

0.613

0.078

7.834

0.000

Seed

0.224

0.098

2.291

0.022

Lecture

0.503

0.120

4.189

0.000

Publication

0.174

0.162

1.075

0.282

Lecturepub

0.187

0.105

1.7V8

0.075

Lectureaid

0.431

0.082

5.2^-5

0.000

Paraiso Region

-0.139

0.089

-1.573

0.116

4.065

1.688

2.4C8

0.016

crv

0.359

0.048

7.491

0.000

Log-Likelihood: -102.4021

Variance components: a^{v) = 0.12893 o^{u) = 0.06052

5 (A

O C S3

«2 3

i .-s

D
>

. . ^

- 1

O CO

c
o
c

I i
3 X

>>
s

<
X

IT)

CT" C

<^ S -

oo i> O

^ 0* iTT ON

- ON Pi ON ON

o ^ o =^ o - o ^ o o o ^: o

<^ S

7^ ^. ^ Z S ^. ^ ^. ^ ^. ^ ^. ^

\o ^ o

^ s -

r-. p* 00 - 00 ov g r~.

o\ ^

O '-^ (N

OO r~

O o O ^
^ 00 g oo g

m r-

G> ON ir- <n
!2 O

2 NO ^ 3 ^ S

00 ^T' ON

^ ^ o ■-

2 ^ 5^ R ^

D
3

o-
o
03

CO
T3

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:nid

•a

_cO

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C/3

-J

C/3

-J

CO
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O.

-J

o
N

General Efficiency Comparisons: Maize and Beans

Table 5.5 shows the difference in means for allocative efficiency between a near zero
wage for unpaid labor and an imputed standard wage for unpaid labor. As in the case of maize,
imputing a wage for unpaid labor increases allocative efficiency for bean farmers. The difference
in group means is statistically significant at the .01 level of probability.

Table 5.5

Differences in allocative efficiency between an imputed standard wage and zero wage for

unpaid labor

Half-normal Exponential

Maize

Difference 0.04 0.05

(9.54)'*** (9.88)-

Beans

Difference 0.08 0.05
(6.85)'" (4.89)-

' t statistics are in parenthesis
"Significant at the .01 probability level

Contrary to maize, allocative efficiencies for beans are statistically and significantly
higher than technical efficiencies at the .01 level of probability (Table 5.6). Allocative
efficiencies are understandably lower than technical efficiencies in the case of maize because input
distribution systems are notably inefficient. Allocative efficiency may be easier to achieve for
low input, traditional farming because it requires the same production-mix decisions that have
been made for centuries and throughout a farmer's life. Technical efficiency, on the other hand,
may vary in conjunction with a farmer's health or age.

Table 5.6

Average Technical and Allocative Efficiencies for Maize and Beans

Maize Beans

Technical Efficiency

Half-Normal .76 .67

(.15y (.12)

Exponential -77 .79

(.15) (.10)

Allocative Efficiency w 0

Half-Normal .24 .89

(.14) (.15)

Exponential .30 .87

(.16) (.13)

Allocative Efficiency w = 5

Half-Normal .28 .97

(.14) (.04)

Exponential .35 .92
U5) C05)

Numbers in parentheses are standard deviations

100

In general, technical efficiencies are comparable to those of maize, lower for the half-
normal but higher for the exponential distribution start (Table 5.7). The markedly low technical
efficiency for beans calculated from the frontier of the half-normal distribution is difficult to
interpret. It is statistically significantly different from the technical efficiencies for maize.
However, it is also statistically significantly different from the technical efficiency for beans
calculated from the half-normal distribution.

The most notable result is that allocative efficiencies are strikingly higher for beans than
for maize. The difference between maize and beans in this regard may be attributed to
differences in the number and accessibility of inputs used in the production process. Maize
production depends on hybrid seeds, fertilizer, and pesticides that are not always available in the
market. Bean production, on the other hand, primarily employs land labor and seeds, all inputs
available to households that do not depend on input markets. This underscores the importance
of ensuring that inputs are available to farmers as they are encouraged to adopt more advanced
technologies.

Variation in efficiency is less pronounced in bean production than in maize production.
Table 5.6 shows coefficients of variation (CV)^ for maize and bean production. CVs are less
in bean production for all variables, but are notably less for allocative efficiency. This is
attributed to the simple and traditional technology employed in bean production relative to maize.
Most farmers, regardless of age or strength, are cognizant of optimum input mixes in bean
production and have access to necessary inputs. Maize technology is more advanced and depends
on inputs that are not universally accessible. The variation drops for both crops when the
standard wage of five lempiras is imputed, suggesting that producers are accounting for the
opportunity cost of free labor (i.e. all are relatively closer to the optimum).

'The coefficient of variation is the standard deviation as a percentage of the mean.

Table 5.7 Coefficients of variation

Maize

Beans

Technical efficiency

Half normal

19.74

17.91

Exponential

19.48

12.66

Allocative efficiency w = 0

Half normal

58.33

16.85

Exponential

53.33

14.94

Allocative efficiency \v = 5

Half normal

50.00

4.12

Exponential

42.86

5.43

102

Summary

This chapter estimated frontier production functions for individu?J bean parcels of HARC
members exactly as in the case of maize. An average OLS function and maximum likelihood
functions which assumed half-normal and exponential distributions for the truncated error term,
u, were estimated. Technical and allocative efficiencies were calculated based on the optimum
input-output relationship observed from the estimated stochastic frontier.

The most notable observation results from the comparison of maize and bean efficiency
measures. Technical efficiencies of bean farmers are comparable to those of maize, but allocative
efficiencies are strikingly higher than maize allocative efficiencies. Unlike in the case of maize,
allocative efficiencies of beans are higher than bean technical efficiencies. Moreover, there is
less variation in bean allocative efficiencies - especially when the standard wage is imputed.

The contrasts between maize and bean production may be explained by the fact that bean
production involves a simpler, traditional technology for which inputs are fewer in number and
more readily available than maize production. Allocative efficiencies for beans are
understandably higher because the primary inputs of beans, labor, land and seeds, are easily
obtained by HARC households. Allocative efficiencies are also subject to less variation because
traditional technologies depend on knowledge learned early in a farmer's life and, unlike technical
efficiencies, are less dependent on physical or mental stamina. The low and variable allocative
efficiency scores for maize underscore the importance of establishing efficient input distribution
systems.

CHAPTER 6
THE INFLUENCE OF
HUMAN AND SOCIAL CAPITAL
ON TECHNICAL AND ALLOCATIVE EFFICIENCY

Introduction

The development of modern technologies necessitates continuous investments in human
and social capital so that workers and enterprises can properly employ new production techniques.
The mere adoption of new technologies (examined in Chapter 3) does not ensure that potential
efficiency will be attained. The optimum investment mix in human and social capital maximizes
the technical and allocative efficiencies presented in the previous two chapters. HARCs provide
efficient structures through which investments can be made in the mental, physical and social
capacity of H ARC members.

Among of the main objectives behind the establishment of HARCs are the education and
social integration of campesinos who historically have been socially and politically
disenfranchised from die educated and economically dominant ruling clais. Human capital, and
more recently social capital, are recognized in mainstream economic analysis as integral
components to optimally operating economies. Cooperatives are often the first form of secular
organization to which campesinos, who are strongly independent and often distrusting, belong.
Cooperatives serve as a means through which extension beneficiaries can be concentrated and
hence magnify the impact of extension efforts. Perhaps more imponant, evidence indicates
(Martin and Taylor, 1995) that cooperatives reenforce extension efforts through members'
learning from each other. The importance of human and social capital to HARCs' broad social

103

104

mission is obvious, but beyond tlie scope of this dissertation. The purpose of this chapter is to
focus on how human and social capital influence the efficiency of HARC production.

Theoretical Underpinnings of Human Capital

Almost all the classical economists recognized the general value of human capital to
society. Adam Smith acknowledged in "The Wealth of Nations" that improvements in the skill,
dexterity and judgement of workers were fundamental to economic progress and increasing
economic welfare. However, the theory of human capital was merely suggested and not
developed in any meaningful sense by the classical economists.

The concept of human capital appeared sporadically throughout this century'. But the
theory of human capital was not established, according to Blaug (1976), until it was given special
precedence in a 1962 supplemental volume of the Journal of Political Economy. Gary Becker
published an article which served as an analytical structure for much later work in human capital.
The issue included an article by Theodore Schultz, who argued that laborers actually operate as
capitalists, investing in knowledge and skills that yield commensurate returns in the labor market.
He expanded the theoretical framework, suggesting human capital be broadened to include not
just men or improved factors, but the economic productivity of education. Concurring with the
findings of Edward Dennison (1962), Schultz offered human capital theory as an explanation for
the large residuals or "technical change" that resulted from economic growth. A seminal article
by Jacob Mincer, which recognized that learning occurs in both schooling and on-the-job training,
was also published in this same issue.

'See, for example, Marshall (1920), Dublin and Lotka (1930), J.R. Walsh (1935) and
Friedman and Kuznets (1945).

105

Human capital research diverged onto two complementary paths. The first focused on
the relation between human capital and earnings distribution-. The second provided a theoretical
groundwork for human capital which could identify the sources of productivity and growth
(Griliches. 1964; T.W. Schuitz, 1963). It has been the orientation of human capital studies in
LDC's and is the focus of this chapter.

Human capital investments generate returns to personal utility that are not reflected in
enhanced productivity or increased earnings. A good liberal arts education, for example, not
only prepares people to compete and communicate more effectively in industry, it augments their
capacity to appreciate and discriminate between a broader range of consumption items. Healthy,
educated people have stronger physical senses and mental faculties to sense and esteem the
aesthetic aspects of goods and services. Increases in utility resulting from human capital
investments are unaccounted in many human capital studies, rendering empirical estimates of
human capital benefits based solely on earnings or productivity artificially low.

Empirical Applications of Human Capital Components

The theoretical bases of how human capital affects productivity is intuitive. Empirically,
however, it is difficult to identify adequate measures which represent tne authentic underlying
factors. Years of schooling is easily measured, but education is not. Extension and health
improve productivity, but both are related to several other factors that cloud measurement.
Empirical measures thus provide no reliable precise elasticities but they do often provide valuable
directional results against which the theory may be examined.

Knowledge is by far the most important and conventional human capital factor. People
acquire and store knowledge through various forms of mental activity. Workers may approach

'See Mincer (1958); Becker and Chiswick (1966); and Blaug (1976).

106

a task equipped with formal education, parental and peer guidance, specific training, and
experience. It is virtually impossible to sort out all the factors that influence the knowledge base
of any individual, much less the aggregate. In order to facilitate empirical testing, knowledge
is considered to emanate from three identifiable factors: education, training and experience. Two
other human capital factors not directly associated with knowledge, healti and religion, will also
be considered. All five factors, by nature of their being imbedded in each human being,
simultaneously influence each other.

Education

General education refers to basic schooling in the "three R's. " Distinct from the learning
acquired through job training and work experience, education expands mental capacity and
indirectly contributes to the capital stock of laborers, managers and entrepreneurs (Sheffield,
1975). Education enhances the cognitive ability of workers and dei;ision makers to better
understand and cope with complex relations that underlie production processes.

Often considered as a useful precursor to direct job training, general education imbues
the human input factor with critical thinking capacity; heightening the- productivity of direct
training and work experience. Simple skills such as literacy and numeracy are essential to any
training program, but even more advanced education in the arts and sciences are generally
considered useful to communication and decision making. Farmers better employ advanced
technologies if they understand fundamental principles upon which those technologies are
developed.

In a continuously modernizing economy, where agricultural research alters production
techniques and non-farm firms provide inputs or input substitutes previously produced locally,
education becomes increasingly important to capacitate farmers to efficiently exploit new

107

technologies and opportunities. Furthermore, sufficient time is rarely if ever available to
reallocate resources so that a new level of equilibrium is reached. Production environments
change so rapidly that new changes occur before the old ones can be fiilly adopted. Thus, the
equilibrated "full efficiency" state achieved in traditional agriculture (Schultz, 1964) almost
always lies beyond the reach of farm people, emphasizing the need to augment the cognitive
ability to deal with disequilibria. Empirical evidence of Schultz and others corroborates the link
between education and productivity.'

Virtually ail human capital studies measure education in terms of schooling. The
assumption is necessarily made, usually implicitly, that education is homogeneous. This may be
reasonable for education within regions, but it is less so for studies which cross regional, and
especially cultural, boundaries. A further problem is that non-measurable factors closely
correlated with education may be the root cause of efficiency improvements, but remain
unrecognized by models which cannot include them. For example, better educated farmers are
more likely to have greater exposure to the evolving social and economic apparatuses of the
developed sector than poorly educated farmers, an exposure that could bear a stronger influence
on productivity than education. Learning that occurs at home or in collective work arrangements
and innate ability are likewise unaccounted for. "Screening" is another problem associated with
analyzing the economic effects of education. Are individuals hired for better paying jobs because
their education has made them more productive, or does their degree act as a bogus signal of
productivity to employers? Fortunately, members of Honduran agrarian reform cooperatives
arguably form a homogeneous group with respect to education, social networking and outside
opportunities.

' See Jamison and Lau (1982) for a good review. See also Khaldi (1975); Pudasaini (1983);
T.W. Schultz (1964); Wu (1977); Huffman (1974); Jamison and Lockheed (1987); Kalirajan and
Shand (1985); and Behrman and Wolf, (1984).

108

Training and experience

Training and woric experience, apart from education, are imporant means of improving
the broadly defined human capital component of knowledge. Several studies have examined the
impact of training on productivity. Recent studies, especially from developed countries suggest
a high pay-off from worker training.*

Substitutability of training programs with general education is a poorly understood but
important relationship, given the relative low cost of training programs. Huffman (1977) and
Jamison and Lau (1982) report evidence which suggests that education can be substituted for
training or extension. However, complementarity between education aid training may also be
observed if the effectiveness of various extension and training methods were examined for
farmers of differing educational levels.

Agricultural training in LDC's is usually designed to complement farmers' paucity of
knowledge. The benefit of general education may not materialize in training programs because
those programs were designed for uneducated farmers. Depth of i.istruction and training
materials may be unnecessarily uniform and cost ineffective because programs are designed to
reach all farmers. The question arises, is it possible to target farmers by demographic
characteristics in order to optimize productivity through training? It would be interesting to
examine die effects of a variety of training programs across farmers of varying educational levels,
although no such empirical studies have been done.

The data set gathered for this study includes both variables needed to advance this
research, years of schooling and a variety of extension techniques. The Integrated Pest

^For developing countries see Jamison and Lau (1982); Shapiro and Miiller (1977); Behrman
et al. (1985); and Kalirajan and Shand (1985). For developed countries see Mincer (1989); and
Vaughan (1989).

109

Management Program of Honduras (Spanish acronym MIPH) offered one of four different types
of extension assistance to each HARC in the study. One HARC received lectures only, one
lectures and publications, one lectures accompanied by electronic visual aids, and one group of
HARCs received IPM publications without lectures. If education enhances extension it may be
detected through the influence of varying extension types on different educational levels.

Health

Health is perhaps the most important human capital factor which influences productivity
both directly and, through its effect on education, indirectly. Malnourished laborers do not have
the caloric fuel necessary for much of the heavy work of traditional agricultural. Moreover,
malnourishment and lack of sanitation make people more vulnerable tc disease, which in turn
lowers productivity and the subsistence output on which many depend. The cycle is self-
perpetuating.

A theoretical link between health and productivity was formulated in Liebenstein's
efficiency wage hypothesis (1957). The essence of this hypothesis is that, under certain
circumstances which pertain to LDC's, increasing food consumption improves productivity.
Starting at a level of daily energy intake that merely covers basal metabolism, productivity
increases at an increasing rate, implying that very low wages induce labor deficits because caloric
intake is so low.

Empirically, there are many problems in measuring the effect of nutrition on productivity
or work performance. Specialists disagree on what constitutes the necessary level of consumption
because individual metabolisms vary. There is also a problem in measuring the energy required
to carry out certain tasks. In LDC's, work is frequently seasonal and can vary a great deal in
intensity. There are also lags in noticing the result of nutritional investments. Severely

110

malnourished people would show dramatic improvement almost immediately, but less
undernourished people who may benefit from increasing the protein or vitamin content of their
diet show positive results at a slower rate. The most serious malnutrition problems occur among
people who become physically limited for life because of early childhood malnutrition. For these
and other reasons, empirical studies conducted thus far have yielded little proof to support
Liebenstein's theory.' Most assumed measures of current physical stature, such as height and
weight or limb circumference, reflect nutritional background.*

Religion

Economics is fundamentally agnostic. Neoclassical theory goes to great lengths to avoid
interjecting even minor personal biases into its analyses. Religion is largely absent from
economic, or even human capital, theory. Nonetheless, religion plays an integral role in human
capital development and has been the focus of recent research. Religion enhances the explanatory
power of earnings variation models formerly constrained to differences in race and sex. Religion
bears strong influence on family values, skills, endowments, goals and culture, which in turn are
determinants of earnings and productivity.

Tomes (1985) distinguishes "religious capital" from human capital in that it includes
"ethical and moral codes of behavior governing consumption, the allocation of time and
interpersonal relationships." He considers religious capital to be a vital foundation for the
standard human capital factors which contribute to productivity and earnings power. Most

' Bliss and Stern (1978); Immink et al. (1982); Behrman et al. (1985); and Audibert (1985).
*Immink et al. (1982); Mook and Leslie, (1986); and Jamison, (1986)

Ill

empirical studies regarding religion have examined how religion influences earnings differentials
and fertility.'

Little dieoretical or empirical research has been conducted on religious capital in LDC's.
Religion played a crucial role in the history of Honduras. The CaAolic Church, still the
predominant religious organization, underwent dramatic theological changes in the early 1960s
that have forced a reassessment of the traditional social structures the Church helped establish in
Latin America. "Liberation theology" holds that wealth should be shared more equitably,
particularly when extremes of wealth and poverty exist. The church encouraged people to form
"base communities" and delegated more responsibility to them to practice their faith. Calling for
wealth redistribution and encouraging small community enterprises obviously has special
relevance for agrarian reform cooperatives. A number of Protestant "Evangelical" churches have
also grown in Central America over the last 20 years. They espouse no unified theology, but
generally hold that people should bare sufferings of this world for greater contentment in the
afterlife. Unlike liberation theology, Evangelical churches take few political stands, but they do
discourage drinking that in excess dampers productivity.

Social Capital

The term "social capital" has had various meanings throughout recent history and across
regions. In communist societies, social capital referred to communally owned plant and
equipment. Social capital has also been considered natural resources upon which future
generations depend (Toman 1994), as public housing (Spence, 1993), o: as the employment of
unproductive labor as an overhead cost (Smith, 1993).

'See Brenner and Kiefer (1981); Becker and Tomes (1976, 1983 and 1984); Chiswick (1983);
and Meng and Sentance (1984).

112

A growing body of literature in sociology and political science is examining various
aspects of what is broadly considered "social capital." The concept, as measured by civic
involvement and satisfaction with government, has special relevance for cooperatives. Putnam
(1993) attributes higher incomes in northern Italy, which also has a successful record of
cooperative development, to a higher level of social capital. Social strictures in northern Italy
are more "horizontal" than in southern Italy, which maintains a preference for hierarchical
system. Helliwell and Putnam (1995) further fmd that social capital has a positive influence on
equilibrating income levels and on the rate of percapita income convergence. These results have
important implications for HARCs. which hold increases in, and the eqi.ilibration of, income as
fundamental goals.

HARCs are prominent instruments for the Honduran government in making the same
attempt Italy made, namely to transfer technology and make physical and human capital
investments in predominantly rural areas. Social capital is worthy of examination to the extent
that it is complementary to conventional forms of investment. Cable and Fitzroy (1980) consider
social interaction a neglected area of study in labor managed firms. The lack of incentives that
property rights theory (Furubotn and Pejovich, 1972) and internal organization theory (Alchian
and Demsetz, 1972) contend characterizes cooperatives fails to take into account social dynamics
that may overcome individual incentive problems. This chapter examines social capital through
interaction between religion, games and music as demonstrated by mcreases technical and
allocative efficiency.

113

Em pirical Model and Data

The tables below display differences in mean efficiencies for HARC members grouped
by several demographic categories. Corresponding t statistics evaluating the significance of the
means differences are presented below each difference. The t test is:

X, - Xj

(6.1) t = -i

where X; represents the mean efficiency estimate of group i, and

(6.2)

where n^ is the number of observations for group i and S'i is the sample variance of group i. If
t > t„.ni +n2-2 there is a "significant" difference between the groups. In other words, there is
less than an a percent chance that a positive difference between the means is attributed to
sampling variability rather than to a difference in population means.

Tables 6. 1 - 6.5 and 6.6 - 6. 10 below display the differences in means for various groups
of maize and bean farmers respectively. Many of the variables fall into one of two mutually
exclusive categories (e.g. a respondent was either literate or not). For order categorical
variables, comparisons were made for groups above and below the average (e.g. efficiency scores
were compared for the group that had more than the average number cf school years with the
group that had less than the average number of school years).

114

Maize

Table 6. 1 shows efficiency differences based on various demographic characteristics. The
most striking result emerges in Proportion output sold. Farmers vho market on average
proportionately more output are more technically and allocatively efficient than farmers who
market less. This result indicates that "hillside farmer" programs, which are designed to improve
efficiency and environmental protection and which are popular among policy makers, will have
limited impact because most hillside farmers are near-subsistence producers.

By contrast, producers who supplement their income with Outside work register a
significantly positive difference in allocative efficiency, but only when the full wage is imputed.
The Labor/land ratio differences are negative and statistically significant for allocative efficiency
when the full wage rate is imputed, indicating that farmers with relatively little personal land have
a low opportunity cost of labor.

The only other significant difference in terms of technical efficiency on Table 6.1 is
observed between those above the age of 50 and their younger counterparts. The negative sign
indicates that older men tend to be less efficient. Given the rigors of fieldwork, one can
understand how younger men would hold an advantage at hard labor. Allocative efficiency is
also greater for farmers under the age of 30. That the negative values for older men and the
positive values for younger men reduce in significance when the standard wage is imputed
suggests that older men have a higher opportunity cost for their labor in individual production
than younger men.

A positive and statistically significant difference is demonstrated between allocative
efficiencies of farmers who are more Literate and have more Primary schooling and Cognitive

115

capacity,^ indicating that more intelligent, better educated farmers are more capable of adjusting
input mixes to take advantage of relative input price differences.

Farmers with larger families are less allocatively efficient than farmers with smaller
families, but only when the wage for free labor is zero. Larger families are not significantly less
allocatively efficient when the standard wage is imputed, indicating that larger families have a
higher opportunity cost for labor than smaller families. This result may seem curious in light of
the conventional belief that rural children in developing societies are used extensively in farm
production. However, children in Honduras now attend school on a routine basis, which divests
production of labor that is necessarily supplanted by capital to meet increasing family food needs.

Table 6.2 shows the differences in efficiency over varying health factors. Larger farmers
are more technically and allocatively efficient than smaller farmers, as demonstrated by Weight,
Arm circumference and Leg circumference. It stands to reason that larger farmers would be
more technically efficient, given the arduous labor involved. The fact that larger farmers are also
more allocatively efficient as well may stem from the fact that smaller farmers often suffered
malnourishment at a young age, which impaired mental capacity. Eye sight is the only other
factor to register a significant result, for allocative efficiency. It too nay be correlated with
greater mental faculty.

Table 6.3 displays efficiency differences across various social capital factors. Religion
is a prominent form of social capital, the primary initiative behind the establishment of many
HARCs and a congregating force in rural Honduras. Catholics appear statistically and
significantly more allocatively efficient than noncatholics, perhaps because base communities offer
a forum for interaction. Evangelicals are statistically and significantly less technically and

'As measured by Raven's colored matrices test.

116

allocatively efficient than nonevangellcals. Their allocative inefficiencies become stronger and
more significant when the standard wage is imputed.

Perhaps the most interesting results are the efficiency differences as they relate to various
forms of extension methods (Table 6.4). Those who received a lecture unaccompanied by
pamphlets or visual aids {Lecture only) register higher technical and allocative efficiencies. All
other significant results are negative, suggesting that supplementary teaching aids are
counterproductive tools in extension efforts. The maize technical efficiency differences on
extension methods are perplexing in light of the fact that the only extension variable that is not
positive and significant' in all three maize production functions is Lecture. The difference could
be explained by the fact diat the control group, which was excluded from the production function
regressions to avoid a singular matrix, is now included in the group against which Lecture only
is compared. Control group shows negative and significant allocative efficiencies, which
indicates that those HARCs that did not receive any extension assistance were significantly less
adept at adjusting input mixes to an optimum.

Finally, Table 6.5 shows efficiency differences for farmers with above average levels of
experience. Experience with herbicides and insecticides appears most helpful in improving
efficiency. To some extent, no single input should be considered apart from the others in that
hybrid seeds require fertilizer and pesticides to maximize potential; it is a package. However,
pesticides constitute the most complicated component of the package. Improper pesticide
application could override benefits derived from hybrids and fertilizer, thus permitting the only
difference in experience to be manifested in pesticides.

'At the 0.1 level of significance.

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Beans

Results of how demographic and human capital variables influence efficiency are less
significant for beans than for maize. The lack of significance may be attributed to less variation
in bean efficiencies (see Table 5.7), and to the fact that the number of bean observations (178)
is half the number of maize observations (387).

Table 6.6 shows differences in the efficiency of bean production across various personal
and household characteristics. The only variable to show a significant difference in technical
efficiency is Proportion output sold. Producers who sell more of their output are also more
allocatively efficient when the standard wage is imputed. The levels of significance are strong.
These results corroborate those of maize: commercial farmers show a higher propensity to
operate more efficiently.

Producers with high labor to land ratios are also more technically efficient and
allocatively efficient when unpaid labor receives no wage. Not surprisingly, and similar to the
case of maize, the difference in allocative efficiency becomes negative for farmers with high
labor/land ratios when the standard wage is imputed.

Literate farmers appear more allocatively efficient than illiterate farmers, but schooling
and cognitive capacity show little influence. Unlike the case of maize (Table 5.3), bean
production is still based primarily on a traditional technology that, holding to Theodore Schultz's
finding in Transforming Traditional Agriculture (1964), cannot be improved by education alone.
Older producers are more allocatively efficient when the wage is near zero, but significandy less
so when the standard wage is imputed, indicating older farmers see less opportunity cost in
devoting free labor to bean production. Similar to the case of maize, allocative efficiency is less
for farmers with larger than average size families, as indicated by the negative sign.

124

Health factors show only a few significant differences in efficiency (Table 5.10). Bean
production requires more labor than maize, but usually over half of it is devoted to harvesting
and shelling. Hired labor is often brought in for those tasks, thus clouding the effect of health
influences. Social capital factors (Table 5. 1 1) again indicate that Catholics are more allocatively
efficient than non-Catholics.

Differences in efficiency attributed to extension methods (Table 5.12) do not counter the
results obtained for maize production. Lecture only and Lecture and publication register a
positive influence on allocative efficiency at a near zero wage rate. Control group is again shown
to be less technically and allocatively efficient than groups that received some form of extension
training.

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Training and Education: Complements or Substitutes?

Maximizing the knowledge of farmers in a target area requires that scarce extension and
educational resources be distributed to the activity with the highest opportunity cost. Evidence
of substitutability between education and training (Huffman, 1977 and Jamison and Lau, 1982)
is based on homogeneous training programs. The four extension programs designed and
implemented by MIPH may have different effects on farmers of varying educational backgrounds.
Publications, for example, are not very useful to illiterate farmers. Visual aids may enhance the
instructional capacity of a lecture for all educational levels, or they may distract from the
substance of the lecture - particularly for farmers unaccustomed to them.

Tables 6.11 - 6.15 (Maize) and 6.16 - 6.20 (Beans) show technical and allocative
efficiency differences for different extension techniques at increasingly higher levels of education.
Maize farmers belonging to HARCs that received a lecture only (Table 6.11) were more
allocatively efficient than other farmers at all levels of education, suggesting that training can be
substituted for general education to improve efficiency. However, all the efficiency differences
in the control group (Table 6.15) are negative and significant for farmers that have at least one
year of primary education. This indicates that complementarity exists between education and
training.

Complementarity between education and extension can be seen at higher levels of
education for other extension types. Perhaps the most interesting result is that farmers with
higher levels of education demonstrate statistically significant greater efficiency in groups that
received publications only for both maize and beans (Tables 6.12 and 6.17). Publications are a
significantly cheaper means of information diffusion than personal contact with extension agents.
In the case of maize, lectures and visual aids differences (Table 6.14) are negative and
statistically significant with no primary schooling, but become positive and statistically significant

132

at higher levels of education. Similarly, for lectures and publications (Tables 6.13), differences
are negative and statistically significant at low levels of education, but are not significantly
different at higher levels of education. These results suggest that complementarity between
extension aids and education exists at higher levels of education.

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Summary

This chapter reviewed the theoretical and empirical features of human and social capital
studies. Human capital, the development of which is a fundamental goal of HARCs, is
undoubtedly important to production. However, the maimer in which it influences production
is not guided by formal theory. Empirical human capital studies also encounter specification
problems in that conventional components of human capital, such as knowledge and health are
presumed to be captured by education and height and weight. Social capital is similarly devoid
of formal theory and has been examined in few empirical studies. The general notion underlying
social capital is that it appears in forms of social interaction that are not necessarily directly
related to work. Thus religion, games and music were considered as forms of social capital in
how they influence efficiency.

Differences in technical and allocative efficiency of individual HARC maize and bean
producers were examined in five groups: personal and household characteristics; physical capital;
social capital; and extension and experience. Maize provided more significant differences than
beans, because maize data had more variation and degrees of freedom.

The most prominent characteristic associated with higher efficiency is the proportion
output sold. Producers appear to be more efficient the more they commercialize their output.
Lecture only stands out as the most effective extension method as measured by efficiency.
Primary schooling and literacy positively influence efficiency. Age shows an inverse relationship
with efficiency, especially for maize. Catholic farmers appear more efficient than non-catholic
farmers, perhaps because base community organizations provide communication fora. Health,
as measured by height and weight and limb circumference, show positive influences on technical
and allocative efficiency. Experience, particularly with herbicides and insecticides, appears to
enhance efficiency in maize production.

144

Finally, this chapter examined the complementarity of education for different types of
extension methods. The Lecture only group showed a strong correlation with allocative
efficiency at all levels of education, suggesting that training and education are substitutable.
However, farmers with at least one year of education in the control group appeared statistically
and significantly less efficient than their counterparts that received some form of extension and
training, suggesting that education and training are complements at higher levels of education.
Complementarity at higher levels of education also emerges from the Publications only tables of
maize and bean producers and from the general pattern of maize tables for Lectures and
publications and Lectures and visual aids.

CHAPTER 7
THE NATURE OF
HONDURAN AGRARIAN REFORM COOPERATIVES
AS PRIVATE ENTERPRISES

The preceding chapters consider aspects of HARCs in a neoclassical economic
framework, which evaluates the production function in static marginal relationships. Broader
discrete relationships, on the other hand, form the boundaries of institutions that matter and
cannot be captured by mathematical or statistical models. According to Jensen and Meckling
(1979), the production function cannot be adequately evaluated without addressing institutions that
govern production:

...the production function of the firm depends on the specificaticn of rights and the laws
or rules of the game governing contracting. The maximum attainable output of a firm is
then not purely a matter of "physical" possibilities given the technology and knowledge;
the production function depends on the contracting and property rights system within
which the firm operates.

The purpose of this chapter is to frame neoclassical findings about HARCs in a broader and
dynamic institutional setting that takes into account contracts and property rights. The analysis
pursues an understanding of what Williamson (1991) terms "discreet structural alternatives," as
opposed to marginal variations.

This chapter is intended to make two academic contributions. First, important efficiency
questions persist regarding the public or private provision of services such as education,
communication and commodity exchange. HARCs and coop support agencies present an unusual
mix of public and private enterprises that could contribute to the growing body of institutional
economic thought and provide solutions to policy makers assisting HARCs.

145

146

There is also a noticeable gap in the literature between cooperative theory (Abrahamsen,
1976; Cobia 1989) and organization theory (Chandler, 1990). The latter primarily treats
hierarchical management issues of large private firms, and the former describes the various rules
and regulations that can govern a cooperative. Williamson (1985) considers institutional aspects
of producer cooperatives understudied, and calls for further research to determine their benefits
and costs.

Observations were made throughout the course of fieldwork (and two years of Peace
Corps service) which serve to illuminate the broader implications of the neoclassical analysis and
explain areas of debility in HARC operations. Ultimately, this chapter is concerned with
examining institutional options which may improve HARC performance.

Introduction

HARCs in general are conceded to be inefficient as reflected by the high rate of loan
defaults. They absorb scarce national reserves, and have prompted influential Honduran sources
to call for their dismantling'. With respect to the sample in this study, only eight of the 27
HARCs claimed to hold no outstanding debt for the purchase of short-term variable inputs.
Large regional cooperatives that made substantial fixed capital investments have also fallen into
insolvency.

Desertion rates reflect part of the problem. According to USAID (1978) and INA (1985),
HARCS endured a 20 - 40 percent membership decline between 1968 to 1984. Barham and
Childress (1992) attribute the abandonment in part to the large number of people required to
invade land, and the relatively fewer number of people constituting the optimum coop size.

'Numerous reports have appeared in the major Honduran newspapers, including El Tiempo,
La Tribuna and La Prensa.

147

Incentives are also geared to encourage abandonment of disenchanted laborers or managers
responsible for misinvestments: HARC members have a right to compensation for duties
performed if they leave the coop, but they are not beholden to any debt outstanding.

The problem

The results of this study challenge conventional wisdom (Alchian and Demsetz, 1972; and
Jensen and Meckling, 1979) in that collective production systems appear more technically and
allocatively efficient than individual systems. Thus, the problem with cooperatives appears to
lie in the financial management of the enterprises, not in production. This lends promise to
cooperatives as viable enterprises because, whereas production inefficiencies resulting from
ineffectual worker incentives and shirking cannot be easily remedied, management problems can
be overcome by identifying sources of institutional weaknesses. So the question arises, if HARC
failure cannot be attributed to the inefficiency of collective production, where can the causes be
found?

Perhaps a solution can be found by a more detailed examination of the HARC as a firm,
which neoclassical theory consigns to a black box. A great deal of economic activity occurs
within firms (Barnard, 1938; Chandler, 1990) and, in the case of HARCs, between firms and
government agencies. HARCs are governed by a conglomeration of implicit and explicit rules
which vary in their degree of enforceability and thus credibility. Those institutions, regarded by
North (1992) as "formal rules (statute law. common law, regulations), informal constraints
(conventions, norms of behavior, and self imposed rules of behavior); and the
enforcement characteristics of both" provide the context within which marginal insights can be
evaluated to clarify misconceptions and/or contradictions.

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Cooperative Enterprises and the New Institutional Economics

The "new" institutional economics (NIB) is distinct from traditional institutional

economics (e.g. Commons 1934, Veblen 1899) in that it takes a positive rather than a normative

approach. The body of literature in the new institutional economics has not yet reached an

integrated, cohesive theory (Furboton and Richter, 1991). Indeed, the definition of "institutions"

varies among the experts:

the humanly devised constraints that structure political, economic, and social interactions.
They consist of both informal constraints (sanctions, taboos, customs, traditions, and
codes of conduct), and formal rules (constitutions, laws, property rights) (North, 1991);

sets of ordered relationships among people which define their rights, exposures to the
rights of others, privileges, and responsibilities (Schmid, 1972);

Institutions can be demarcated into two classes: (1) conventions; and (2) rules or
entitlements (Bromley, 1989);

regularities in behavior which are agreed to by all members jf a society and which
specify behavior in specific recurrent situations" (Schotter, 1981)

Conceptual tools also inevitably differ and are usually refined to suit particular
circumstances. The rationale for institutional economics, to account lor the shortcomings of
neoclassical theory, holds as much intuitive appeal as it does challenge in application. In spite
of the widespread acknowledgement of Coase's postulate that the choice between organization
within the an economic unit or through the market forms the nature of the firm's existence,
empirical applications are sparse (Coase. 1991). However, elements of NIE are emerging which
provide means for expanding insights of neoclassical analysis of the "bl ick box" or firm.

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Why Firms Exist

According to Coase, the existence of a firm rests not on some technological base, which
was the conventional wisdom prior to his seminal 1937 article, but primarily on the minimization
of transaction costs, the costs of doing business. If transaction costs wers zero, labor and capital
could be traded across households or individuals. Using an example from The Wealth of Nations,
the manufacturer of pins would find it very costly to obtain labor services through the market
from the households of the sharpener and the head maker. Delivery and collection of pin
components alone would involve prohibitive costs, but the process of determining prices and
negotiating individual exchanges also impose costs. Contracting labor services under one roof
where the sharpened pin can be handed directly to the head maker considerably reduces the cost
of conducting organizational transactions.

Institutions are important to any economic system which involves positive transaction
costs because, as Coase (1991) rationalized,

"what are traded on the market are not, as is often supposed by economists, physical
entities but the rights to perform certain actions...."

Campesino unions altered land tenure patterns to broaden member rights to market labor services

in a manner formerly restricted by dominant share tenancy systems. Landless farm laborers

banded together to obtain for their actions a greater share of the return to the land to which they

had devoted their labor and to gain greater control, via cooperatives, over firm management

which governs their actions. Institutions then, particularly legal instruments at the disposal of

policy makers, are critical to expanding the rights to "perform certain actions," a fundamental

goal of both classical economics and HARCs.

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Cooperatives in the NIE

Most of the empirical NIE literature regarding transaction costs deals with explicit
contracts between firms in developed countries (Williamson and Masten, 1995). Implicit
contracts are recognized as being just as important, but diey require assessments that are more
subjective in nature. Producer cooperatives, which are woven together with implicit contracts,
have received little attention in economics literature. The term only appeared in ten references
contained in the ECONLIT database (there are of course scores of articles on cooperatives, but
they concern autonomously formed firms with clearly defined property ■•ights).

Corporative enterprises have a notable survival record in France and Italy and have been
successful in East Asia (Asian Productivity Organization, 1989). Recent empirical evidence from
Italian and French cooperatives (Bartlett et. al., 1992; Estrin and Jones, 1992) and the famously
successful Mondragon cooperative in the Basque region of Spain suggest that labor managed firms
are even more efficient than private firms.

The dynamics that contribute to cooperative success or failure are not well understood.
Theoretical exercises" regarding cooperative operations are based on restrictive assumptions with
respect to objective functions and work rules. It may prove more insightful to consider internal
cooperative relations as they are influenced by the official agreements and implicit contracts upon
which cooperative alliances depend. Knowledge about the viability of contracts under varying
legal and social constraints would lend more precision to the task of designing efficient
corporative organizations.

^See Prychitko and Vanek, 1996.

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Contracts

Transaction costs are inversely related to the efficacy of contracts. The nature of
contracts thus matters to collective enterprises such as HARCs that are bound by both internal
and external contracts. The ideal transaction is "sharp in by clear agreement; sharp out by clear
performance" (Macneil, 1974). Unclear agreements and obscured performance weaken the
confidence critical to effective corporative enterprises. The benefits derived from contract are
jeopardized in the presence of bounded rationality or "limited cognitive competence" and
opportunism or "self-interest seeking with guile" (Williamson, 1985). Both are notably present
in HARCs.

Contracts can be supplanted by the market when standardized assets are exchanged, even
in the presence of bounded rationality and opportunism. The identity of parties related by
exchange is unimportant in that assets may be acquired elsewhere; continued relations are
unnecessary. However, when asset specificity or non-homogeneous assets, exist, there is the
potential for some agents to secure "quasi-rents" generated by the uniqueness of the assets they
control. In the case of HARCs, asset specificity characterizes the services and inputs that are
ostensibly obtainable from government support agencies and/or private firms.

Exchanges in which all three are present, bounded rationality, opportunism and asset

specificity, require a governance structure to ensure the integrity of the transaction. Efficiency

is served when organizational structure is adjusted to minimize transaction costs which vary

according to such things as capital holdings, frequency and risk. According to Williamson

(1985), the organizational imperative becomes this:

"Organize transactions so as to economize on bounded rationali:y while simultaneously
safeguarding them against the hazards of opportunism." (p. 32).

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No task could be more appropriate for the viability of HARCs. One tould argue that such an
imperative applies to any type of economic organization. However, most organizations which
develop autonomously economize transactions in a safeguarding fashion because participants are
protecting their interests. Transactions in Honduran cooperatives merit .special attention because
the environments in which they operate were established by outside sources whose incentives did
not necessarily coincide with those of the coop members. The following sections review those
institutional apparatuses surrounding HARCs and HARC production processes.

Contracts Related to HARC Basic Grain Production

Most of the contracts associated with HARCs are implicit, the oroad outlines of which
are documented in plans drawn with support agencies and in minutes ov meetings. At the time
data were gathered, various agencies assisted HARCs in drawing up plans for the upcoming
planting seasons. Normally, maize is planted in primera. Beans are planted in postrera between
the rows of dried maize stalks.

HARCs in good credit standing receive loans from the National Agricultural Development
Bank (BANADESA). Those who have credit problems solely with BANADESA normally
receive credit and assistance from the Natural Resource Ministry (RR.NN.). HARCs that have
outstanding loans with both those institutions can obtain credit from the National Agrarian
Institute, INA. Loans are usually granted at the beginning of the season on a lump sum basis,
but deductions must be solicited and recorded for each input purchase.

Typically, an agronomist from one of those three lending/development institutions is
assigned to the cooperative/borrower. The decision-making process varies depending on the size
and social dynamics of each HARC, but agronomists' recommendations are not commonly
disputed. In a few HARCs with marginally qualifiable credit standing, agronomists insist on

153

"managing" the production as one collective unit to a point where profitable output is assured,
after which time land is permitted to be parceled to individuals.

After target levels of production are developed, solicitations are made to the credit agency
to release ftinds for input purchases, sometimes including labor costs for coop members. Often
these decisions are made by the agronomist alone, and, in the case of large HARCs, in
conjunction with a few coop administrators.

Postrera maize is harvested between September and November (o amortize debt. Initial
harvests are stored for household consumption. HARCs have an ostensible contract to sell
surpluses at guaranteed prices to the Honduran Institute of Agricultural Marketing (IHMA), the
national grain marketing board. Usually, however, they sell to intermediaries, known principally
as coyotes.

Bean production occurs exclusively on individual parcels. Credit is provided to some
HARCs for bean production as well, though for much smaller sums as beans require fewer
inputs. Bean output may be sold to IHMA for guaranteed prices as well, but is usually sold to
middlemen who own transport vehicles.

The Standard Administrative Chart

A standard administrative chart illustrating HARC internal and external associations is
displayed on Figure 7.1. Ail HARCs incorporate labor, most of which is unspecialized.
Management and peer instruction, two elements that represent fundamental reasons for forming
cooperatives, are also incorporated. Management gives rural farm laborers power over their lives
and, in most HARCs. members are required to serve periodically in official management
positions. The mere act of collectivization reduces barriers that formerly prohibited peer
instruction, a service that would involve transaction costs among individual, unassociated farmers.

154

A few relatively large groups own machinery and storage facilities. Smaller HARCs do not
produce the volume necessary to justify incorporation of such lumpy investments and acquire
them through the rural service market, from parent regional coops, or from government agencies.

Three government agencies provide production assistance to HARCs, INA, RR.NN. and
BANADESA. All three provide credit and technical assistance. INA is also charged with the
very delicate task of providing land-use rights and ultimately, to those few groups which make
all the payments, full ownership title to land. RR.NN. on occasion supplies variable inputs,
including seed, fertilizer, pesticides and machinery services. The principal private enterprises
that serve HARCs are input suppliers and intermediary supply purchasers. The national grain
marketing board, IHMA, purchases output at ostensibly guaranteed prices.

Explicit contracts are devised for credit and land titling. Technical assistance is a part
of the credit contract, but roles of technical advisors are not listed in great detail. Technical
agents are usually given authority to control the dispersion of credit funds, a rational instrument
intended to protect lender interest, that can be used to influence HARC decisions.

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Transaction Association by Activity

Figure 7.2 shows a transaction map by activity, rather than by organizational entity as
in Figure 7.1. The minimization of transaction costs associated with activities constitutes the
economizing action which gives rise to the firm. Property rights of activities are consigned to
organizations by explicit laws. The use of those activities, to generate independent and efficient
HARCs or to absorb HARCs to serve agency interests, depends on the viability of contracts
governing agency - HARC relations, the institutional environment.

Purchase and sale contracts, which represent the exchange of money for inputs or outputs,
are displayed by dashed lines in Figure 7.2. Solid lines represent service and support contracts
for which no money, outside member or administration fees, are exchanged. Explicit contracts
are indicated by black lines, implicit contracts by gray lines. All explic.t contracts are assumed
to be transparent and implicit contracts non-transparent. Thin dotted lines depict the coopting of
another entity that is enabled by not fulfilling implicit contracts.

The purpose of the diagram is to identify implicit contracts and examine their reliability.
The activities in Figure 7.2 illustrate the contracts that govern transactions for the "right to
perform certain actions" (Coase, 1991). Figure 7.2 thus represents a more fundamental picture
of relations of the black box or firm than Figure 7.1. Transactions wiJi particular entities are
not necessary to the basic needs of HARCs; transactions that acquire rights to perform essential
actions are necessary. Assessing the acquisition of those rights renders a more precise illustration
of HARC weaknesses and how they may be resolved.

Incentives are of a different nature in the two diagrams. In the standard administration
chart, incentives are aligned within each organization. In the activity chart, by contrast.

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incentives are characterized by the nature of the contract that governs the transaction and by the
relative position of the activity. If the contract is not a credible commitment, and is not
buttressed by a credible threat, then the right to perform the action is jeopardized.

The manner in which transaction costs are minimized, through the market or through
internal organization, is not the same for private firms as for quasi-autonomous firms. Most of
the NIE and transaction cost literature deals with autonomous capitalistic jnterprises (Williamson,
1985) or macroeconomic issues of public welfare (Bromley, 1989). HARCs are micro-enterprises
that cannot be considered capitalist or even autonomous. HARCs thus present a third type of
transaction cost minimization alternative beyond the market and internal organization: contract
with mass social organizations and government entities of potentially dissimilar incentives. The
discussion below considers the incentives and viability of ostensible constraints associated with
the parties of each activity.

Internal Contracts: The Black Box of the Firm

The HARC is represented by a thickly lined box, the black box of the firm. Internal
contracts are both explicit and implicit. Formal, apriori established regulations, or "rules of the
game" provide a broad governance structure for cooperation among HARC members. They are
determined by institutional transactions (Bromley, 1989), or what Davis and North (1971) term
the institutional arrangement. For example, requirements with respect to meeting attendance,
fmes for missed work days and election processes form recognized and enforceable parameters.

Many regulations, particularly those governing monetary dealings such as input purchases
and output price negotiations, render discretion to HARC central administrators. That discretion
is insulated by ignorance when information is lacking to the asemblea general (general assembly)

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through illiteracy or high transaction costs of acquiring information. The larger and more
complicated the coop, the more elusive is operational information.

Labor-labor contracts

HARC members contribute labor to an enterprise in which they expect fellow members
to share their labor. That collective plots are relatively more technically and allocatively efficient
than individual plots suggests that implicit contracts across laborers may hold. The greater
efficiency may be attributed to better organization, but if labor commitments are relatively weak
on collective parcels it is not enough to override gains in efficiency resulting from better
organization. Given the centrality of labor to basic agricultural production, collective or
individual, it appears that internal implicit labor contracts are strong.

Administration-labor contracts

Administration of HARCs takes on many forms. Ostensibly, officers are elected on
regular intervals and serve terms established in cooperative guidelines. The elected officials are
responsible to formally represent the HARC to outside interests and sign formal, explicit
contracts. Often, however, real authority rests with one or a few individuals. When HARCs
were initially contacted for participation in this study, some presidents directed inquiries to
strong-minded individuals who held no elected posts. Their dominance A'as also often observed
through the dynamics of HARC meetings.

Ultimate authority rests with the asemblea general, which approves operating plans, but
the details are carried out by central administrators. It is a logical arrangement. Even if all
HARC members had the capacity to review potential production technologies and financing
arrangements, which few do, the time involved in acquiring, sorting and processing relevant

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information would entail significant transaction costs. Ideally, administrators would allocate
H ARC resources to those activities which have the highest opportunity costs to the collective unit.

The viability of implicit contracts between central administrators and labor is difficult to
objectively determine. Some HARCs had fallen into unwarranted debt because of unscrupulous
administrators, who were subsequently ostracized by the other coop members. However, an
important constraint on HARC administrators at the local level is the relatively small amount of
credit extended on an annual basis. Unlike large capital investments, which are less open to
scrutiny and offer substantial sums for opportunism, short term loans are small and invested
piecemeal within the cooperative unit. Thus implicit labor-administrator contracts form more
credible commitments. This is not to argue that contractual dealings, including credit and the
purchase of inputs, between administrators and technical assistance agencies enjoys the same
degree of credibility. Still, the relatively minor gains obtainable from the low credit level, and
the credible threat attending localized operations, inhibit administrators from indulging in
activities which would jeopardize long-term opportunity and thus Jie welfare of HARC
operations. The main weakness of the administration-labor contract is attributed to inadequate
human capital.

External Contracts: Association with Support Agencies

The maimer in which transactions are organized with supporting agencies is just as
important to the cooperatives as internal transaction arrangements. Operating designs of HARCs
almost always result from external imposition, rather than the autonomous will of the campesinos.
In early stages of coop development, paternalism and external assistance are inevitable to generate
long run, self reliant and voluntary cooperatives (Lele, 1981). HARCs are constructed under the
guidance of strong personalities within the group, the parent camp^.sino organization and

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government agencies related to agriculture, agrarian reform and cooperative development. Just

one agency, the National Agrarian Institute (INA)

"intervenes in project design, feasibility study, technical and administrative assistance for
credit acquisition from national and international lending institutions and processing

and/or business agreements with national and international companies Large

(cooperative) projects.... are managed with almost total government agency support and
direction from the formation and transfer of the group and the granting of land to the sale
of the product." (Cardonap. 102-103)

Other government agencies and campesino unions exert similar influence over the cooperatives,

rendering the coops vulnerable to state exigencies or the political priorities of the party in power.

The administration-labor contracts are distinct from contracts HARC administration

manages with external agents. The bitter disputes between HARCs and support agencies, with

both sides charging the other with mismanagement, are not attributable to ineffectual

administration-labor contracts. When support agencies and HARCs come to loggerheads, usually

the majority of the HARC goes along with the official position.

Campesino unionizing

The foundations for unions are different from those of cooperatives. Unions are founded
on political organizing and require a large number of members to be effective. Cooperatives are
founded on capital and must at least achieve solvency if they are to survive and satisfy any other
objective. Cooperatives may be large, as demonstrated by those in the United States where they
have increasingly taken on a product processing role to provide value-added margins to declining
rural communities. But producer cooperatives are by nature relatively smaller than unions
because the transaction costs associated with coordinating workers in dissimilar situations are
high. Individual producer cooperatives face problems specific to their lo;al areas and situations,
problems that cannot be addressed by broad policies of large umbrella organizations. Coop
members feel a much stronger sense of ownership of their coops than they do of the campesino
unions to which they are also members because communication is local and visible.

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Incentives are ostensibly similar for campesino unions and the HARCs they spawned,
namely the operation of economically vibrant enterprises. However, the constraints placed on
individual administrators of campesino unions vary significantly from those of HARC
administrators. HARC administrators are closely scrutinized by members who almost always live
in the same community. Decisions made in campesino unions, on the other hand, are open to
a cluster of close associates who constitute a relatively small proportion of the entire unit. Coop
administrators are more immediately beholden to HARC members' interests than are union
administrators. Union power is often built on small clusters of association within the larger
union. Problems arise when union administrators exploit HARCs through violation of implicit
contracts that serve to incorporate HARCs into serving the larger purposes of union
administrators at the expense of HARCs. At that point HARCs begin to lose autonomy and
cannot be fully considered "firms."

Nor can campesino unions be considered autonomous political institutions, given the
national and international forces which sought to influence them. Campesino union management
handles large sums of money for both local support organizations and for development assistance
on capital intensive investments. The latter is usually worked out with the government agencies
that provide technical assistance and, in the case of international funding, breign agencies. Large
regional cooperatives, such as CARAOL, made substantial capital investments in deals worked
out between campesino unions, government credit agencies and private suppliers. Several
concerns were heard among HARC members, who were ultimately responsible for repayment,
that provisions were not made for equipment maintenance and, perhaps more importantly,
competing investments had higher opportunity costs.

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Land tenure

Land tenure is tenuous in Honduras, nonetlieless legal documents exist between INA and
each official HARC through their campesino unions. Very few HARCs own their land, but are
given permission to use land.

The challenging task of balancing intense, partisan political dispu:es involving land tenure
falls on the National Agrarian Institute (INA). It is INA's responsibility to clarify poorly defined
land rights in an agrarian-based economy between traditional landed interests and landless
campesinos who claim land is underutilized and not fulfilling a social purpose. Two former
heads of INA, Sandoval Corea and Ponce Cimbar, acknowledge INA^ has had difficulties in
distinguishing public lands from private lands (CEDOH, 1992). Perhaps because of the high
stake political battles, INA has played a rather capricious role in Honduran resource policy and
the Honduran economy.

Sandoval (CEDOH, 1992) expressed concern about the conflic: of interests that arises
when the land tenure institute, INA, gives any funding to campesino groups, large or small. INA
evolved from an agency entrusted to settle property rights disputes to a development agency that
provided credit and tens of thousands of dollars to campesino unions fo. education and training
projects. Land tenure instability has, aside from the obvious long-run problems, short-run
consequences for HARC performance to the extent that members' expectations about the viability
of the enterprise diminishes their investments in it.
Technical assistance

Technical assistance, which ultimately governs credit and input supply is managed by one
or more of the government support agencies, INA, RR.NN., or BANADESA. The individuals
employed to provide technical assistance are not necessarily evaluated according to the success

164

of the HARC operations for which they are entrusted. Agencies are placed under the auspices
of politicians whose authority rests on their ability to remain in office. To the extent that HARC
performance contributes to prevailing political priorities, HARC interests will be served.
However, at most, HARC interests take on secondary importance and may be discounted entirely
to the extent that ignorance and complexity obscures institutional transparency. If contracts do
not hold as they are designed, HARCs may be absorbed into the larger, politically geared national
institutions that provide technical assistance, and must serve the objectives of those organizations
above their own. They may take on the detrimental characteristics of the notoriously inefficient
"state-run farms."

Oversight of technical assistance is relegated to each HARC. However, administrators
responsible for reviewing and negotiating agreements for technical assistance, which includes
credit and input purchases, may not be literate.

The principal architect of the historic 1968 land reforms, Roberto Sandoval Corea,
expressed bewilderment at the manner in which international development agencies supplied
funding for projects without effective controls. Sandoval also charged that subsequent state
financing of campesino unions had a corrupting influence and thwarted the reform movement
(CEDOH, 1992). Corruption, which the Cold War accelerated markedly in Honduras during the
"lost decade" of the 1980s (Hayes, 1989), is widely recognized as a pervasive influence in the
Honduran economy.

Credit

Virtually all seasonal credit for variable inputs comes from government agencies. Credit
contracts are written so that the cooperative is ultimately responsible for repayment. Almost all
loans are unmortgageable and given on a short-term basis for annual operating expenses. No

165

individual, including an elected official, is technically accountable for repayment. Holding
institutions rather than individuals responsible for credit operations presents a credit risk,
particularly in the absence of auditing services.

Credit from government agencies is usually granted for the upcoming growing season and
must be repaid at harvest. Defaulted loans incur substantial transactions costs for both lending
agencies and HARCs. Outstanding debts compel HARCs to seek alternative sources of funding
with intermediaries, who provide inputs or cash at high interest that is deducted from the forward
purchase price. Ties with government agencies under such circumstances jeopardize potential
earnings because the government marketing board, IHMA, may withhold payment to clear past
debts. By the same token, government lending agencies incur larger transaction costs of
monitoring defaulted groups in order to recoup previous losses.

Marketing

Most HARC output is sold to the national marketing board, IHMA or intermediaries.
The harvesting and selling of grain is visible to all members, who uf ually participate in the
process. Grain prices paid by IHMA are supposedly guaranteed by futures' notices, but the rules
governing maize grading and pricing are inconsistent and have disappointed some HARCs.

A marketing incident of a HARC in the sample illustrates the role of transaction costs and
the importance of enforceable contract. Rather than sell to an intermediary, the HARC attempted
to incorporate transportation into its operations by renting a truck and delivering the maize
directly to IHMA. However, IHMA quoted a price considered unsatisfactory by the HARCs
members. After waiting at the gate for two days trying to negotiate a higher price and paying
truck rental charges, the HARC ultimately sold to an intermediary for a i.igher price than offered
by IHMA. The intermediary sold the grain to IHMA, demonstrating clearly that IHMA was

166

willing to pay a higher price than that offered to the HARC. The incident reveals a breakdown
in the contract between IHMA and the HARC and another, illicit, contract between intermediaries
and IHMA. The notion that prices are unreliable would discourage HARCs from incurring
transportation charges to sell to IHMA, thus reducing the efficiency of HARC operations in
general.

The theory of transaction costs also serves to explain why IHMA administrators may
choose to deal with a few intermediaries rather than several grain producers. Conceivably, the
same extra-official commission that motivated the higher price for die intermediary could also be
negotiated directly with each HARC. But negotiating one commission with one or a few
intermediaries to exercise price discrimination requires fewer transactions be made. It also
alleviates the cost of risk associated with several producers who may not wish to engage in such
transactions.

Intermediaries can provide a valuable and efficient service, but only when they operate
in a competitive environment and hold no extra-official price advantage over HARCs.
"Information asymmetries" (Williamson, 1985) impose risks that increase the transaction cost of
incorporating transportation higher than the cost of acquiring transportation in the market.
Intermediaries' potential for monetary gain expands to the extent Uiey can exen monopsony
control. Contracts that maintain credible marketing commitments would improve the efficiency
of HARC operations and production distribution.

Vigilance Committees

Vigilance committees technically exist in HARCs to ensure that all contracts, internal and
external, are carried out according to their stated purposes. However, vigilance committee
members are often illiterate or not functionally literate enough to comprehend all the details

167

associated with overseeing dealings with which they are unaccustomed. Even when they are
capable of reviewing records, it involves another task on top of a heavy labor load, not to
mention confrontations with friends.

Proprietorship of vigilance is consigned, logically, to each HARC. After all, a main
purpose of cooperative enterprises in LDCs is to empower impoverished individuals to look after
their own best interests rather than be dependent on traditional elites. However, a contradiction
arises when cooperative organizations are entrusted with the responsibility to oversee operations
that, because of their complexity, involve significant external assistance and are by the same
token beyond the comprehension of most members. HARCs are not kibbutzes, which survive
under similar organizational structures because they have impressive levels of human and social
capital. The question arises, can proper oversight be given to HARC interests in the absence of
an oversight capacity necessitated by the level of technical assistance provided?

The Design of Efficient Institutions

The administrative flow chart in Figure 7. 1 differs in style and substance from the activity
flow chart in Figure 7.2. The administrative chart shows official associations between HARCs
and external support and market agencies. The activity chart outlines contracts that exist to
facilitate the exchange of rights. The rights of technical assistance and credit are supplied by the
government to HARCs in exchange for the right to ameliorate civil tensions by developing
lucrative economic enterprises among the politically troublesome disenfranchised. However,
policy mechanisms intended to exchange those rights breakdown becausi credible commitments
are not made. Either explicit contracts are not enforced, or implicit contracts are based on norms
or customs that do not exist.

168

Williamson (1985) distinguishes credible commitments from credible threats in that the
former are "reciprocal acts designed to safeguard a relationship" and "are undertaken in support
of alliances and to promote exchange," whereas the latter involve "unilateral efforts to preempt
an advantage. " The financial breakdown of HARCs indicates that credible commitments were
not made in some areas of operation that were not safeguarded by credible threats.

Credible Commitments

Credible commitments are valuable assets to an economic enterprise because they involve
no ex poste transaction costs. For example, if guaranteed prices are not offered at the time of
sale, producers have to incur the cost of legal recourse. Similarly, if borrowers refuse to repay
loans, lenders incur costs of pursuing payments.

The only notable credible commitments made in HARC operations, the labor-labor
contract and the administrator-labor contracts, occur within the black box or corporative
enterprise that constitutes a HARC. Fortunately, the labor-labor contract is the most necessary
of all credible commitments because it is the one that is virtually impossible to remedy by
institutional modifications. The transaction costs of preempting, monitoring and recovering lost
labor would not be worth the payment to labor. Conversely, transactions that cover larger cost
items such as input purchases, credit disbursements and marketing are more concentrated and thus
justify some additional ex ante or ex post transaction costs.

Non-credible Commitments

Non-credible commitments necessitate credible threats throu:?h various contractual
mechanisms. Government support agencies and campesino unions both have incentives to
incorporate HARC enterprises to serve their own operations. Indeed, evidence of the regional

169

cooperatives such as CARAOL and the manner in which technical jobs are doled out to political
appointees indicates that commitments between external sources requires some credible threat.

Ostensibly, HARCs hold legal recourse to ensure their best interests are being served.
However, HARCs do not have the human capital or administrative capacity to carry out the task.
HARC administrators are susceptible to being inveigled into options tha: may not necessarily be
in the best interests of the HARC. thus jeopardizing the viability of the labor - administrator
contract. Transparency of operations is virtually non-existent in relations between HARC
administrators and government support personnel. Lenders of funds, both national and
international have not imposed adequate auditing controls. The requirement of auditing,
particularly as an a priori condition of a lending agreement, serves as a viable threat to preempt
unwarranted advantage in transactions.

An Empirical Observation: The Guanchfas Cooperative

The institutional concepts developed above account for why HARCs may fail or remain
weak, but do they also correspond to success cases? The Guanchfas cooperative on the north
coast of Honduras, which was extolled as a model by all proponents of collectivization, provides
an interesting case study.

Observers of Guanchfas were quick to attribute its success tc its collective form of
operation, ignoring other factors absent in cooperatives sponsored oy the goverrunent or
campesino unions. Guanchfas was not initially successful in paying off its loans when it operated
as a basic grains cooperative. It became modestly profitable when it abandoned basic grains for
plantains, but could not obtain government support for cash crops (McCommon, et al. 1985).

Guanchfas then turned to Standard Fruit's independent banana growers program.
Standard Fruit agreed to purchase most of Guanchfas' production and provided scarce technical

170

assistance, credit and inputs. Guanchi'as' success may be attributed to two aspects of the
institutional design that prevented systematic leaks common to the basic grain sector.

First, Standard Fruit had a financial interest in providing inputs and technical support in
a timely fashion and in overseeing compliance. In the basic grain sector by contrast, government
extension and loan agents are governed by political rather than economic oversight. Government
agents collaborate with agency superiors and coop leaders whose best personal interests do not
necessarily coincide with making cooperatives financially sound enterprises. A potential HARC
loan default is likely to draw a greater response from a company representative responsible for
generating returns to company capital than it would from a government representative.

Second and perhaps more significantly, Standard Fruit had control over Guanchfas' output
and lived up to purchase agreements. Cooperatives in the basic grain sector face more than one
buyer. If they sell directly to the Honduran Institute of Agricultural Marketing (IHMA),
outstanding loan charges are deducted from the bill of sale. IHMA also reneged on promises to
purchase grain from farmers at guaranteed prices (USAID, 1982), imposing a higher risk burden
on cooperative planning. Farmers gain a higher return from coyotes (intermediaries) who offer
nominally lower prices than IHMA, but whose real prices, adjusted for lean charges and artificial
quality deductions, are higher.

The success of the working arrangement with Standard Fruiv is demonstrated most
significantly by the increase in income to Guanchfas' members. The average annual income
increased from 800 lempiras in 1969, the first year of the program, to 4,484 lempiras in 1980,
over three and a half times higher than the average income in Honduras. Investment returns have
been turned back into new capital equipment, member housing and social services in education
and health.

171

Standard Fruit signed agreements with two other coops whic'i were also successful,
although not as remarkable as Guanchias. The arrangement is mutually beneficial. Workers gain
control over production resources, and Standard Fruit maintains stable political relations and
portrays a good image. Standard Fruit created a cooperative in March of 1996, not with an
existing HARC. but by granting land and capital to a group of employees. Both Standard Fruit
and the United Fruit Company intend to turn over more resources to workers to quell political
opposition and worker strikes, which have proven quite costly in recent years.

Summary

The previous chapters demonstrate that HARC breakdown cannot be attributed to labor
shirking theorized by Alchian and Demsetz (1992). This chapter attempts do differentiate further
the underlying defects by examining HARCs in a broader institutional context. It is also an
attempt to contribute to the institutional economics literature, which provides few guideposts for
the analysis of cooperatives.

Property rights and the contracts which govern the behavior of HARCs and associated
agencies formed the core structure of the analysis. Incentives that are potentially present in each
were also examined heuristically in light of statistical results and observations made throughout
the course of fieldwork. A standard administrative chart was compared to an activity chart which
delineated transactions for inputs and services vital to HARC performance.

Internal contracts, including implicit contracts, appear to hold. The credibility of Labor-
labor contracts is demonstrated by the higher technical and allocative efficiencies of collective
parcels over individual parcels. Administrator-labor contracts also appear to be credible,
demonstrated by the greater scrutiny that exists at the local level and the minor gains relative to
risk associated with breaking agreements.

172

Contracts between external agents and coop administrators, on the other hand, are less
dependable, primarily because they are exercised without proper oversight and across parties of
disparate incentives. The contract breaks down because there is a weakness of purview that
conventional lenders would require over operations in which their funds are invested.

Marketing contracts between IHMA and HARCs have also been unreliable, usually to the
detriment of HARCs. Marketing contracts lack credibility because they are unaccountable and
involve direct monetary transactions with government agents who art beholden primarily to
political sponsors.

If all contracts functioned ideally, "sharp in by clear agreement; sharp out by clear
performance," (MacNeil, 1974) HARCs would be more independent and commercially vibrant.
The problem is that contracts are not clear and are not enforceable, injecting risk and
undercontldence in HARC development - an undertaking which, by its collective nature, requires
stability and assurance of mutual success. Vigilance is ironically relegated to the HARCs,
institutions established in large part to develop in the long run the human capital to oversee
technically advanced operations. HARCs lack the human capital in which some cooperatives,
notably kibbutzes, are richly endowed. Provisions to account for short-run human capital
deficiencies may be necessary.

Independence of HARCs is threatened to the extent that their incentives do not correspond
to those of government support agencies and campesino unions. HARCs become components of
a larger government or political enterprise when contracts do not hold. Little wonder they have
generated many of the same criticisms leveled against state-run farms. HARCs' identity as firms
which minimize transaction costs is obscured because the instruments they rely on to carry out
transactions, the contract, is not credible.

173

The cooperative model presented in this chapter was developed in light of observed
failures, but also conforms to cooperatives which have enjoyed substantial success through
contracting with a private firm. The most notable, Guanchfas, demonstrated its capacity to
function as a profitable, independent enterprise when it contracted with the Standard Fruit
Company. Standard Fruit overcame the incentive problems inherent in the governmental and
political organizations that ostensibly provide support, and Guanchfas evolved into a cooperative
that produces high quality products and generates investment returns that significantly increase
member income and achieve social goals.

According to the cooperative model presented in this chapter, HARCs have the internal
dynamics necessary to survive, but encounter problems with external agents whose incentives do
not coincide with those of HARCs. Contracting with a private enterprise whose success depends
on the economic success of the HARCs has shown itself to be a viable i olution to the problems
that prohibit HARCs from emerging as independent and financially sound firms. The
arrangement may appear as an increasingly appealing alternative in the future as Central America
is opened to free trade and as autonomous political forces demand the integration of poor people
into an economy that provides opportunities for all.

This is not to suggest that government support agencies do not have a useful role to play
in HARC operations. Guanchfas was aided completely by Standard Fruit because the company
was large enough to provide all technical assistance. Most economic opportunities for HARCs
dwell in the small-scale supply of products to local markets in expanding towns and cities.
Perhaps some of the very skilled agronomists and technicians who have received training in
Honduran agricultural colleges could acquire funding to contract with HARCs. Structuring
incentives through tax breaks or other means for skilled agriculturalists could inject capital into
HARC operations in a manner which safeguards lender interests. They would still depend on

174

government support for research and technical assistance. More research needs to be done to
compare the costs of such an endeavor with other rural development programs.

Cooperatives serve as a viable organizational mode to transfer technology for the
production of nontraditional commodities, and private agents provide capital and technical
assistance. Most importantly, the collaboration is based on mutually beneficial economic, not
political, incentives.

CHAPTER 8
SUMMARY AND RECOMMENDATIONS

Colonial forces confined Honduran campesinos to share tenancy systems that precluded
human capital investments and advances in agricultural technology and marketing. Unionization
of banana workers and the revolution in Cuba precipitated domestic and international pressures
for agrarian reform. Those reforms gave limited land access to groups of farmers who were
encouraged, through support services and through denial of individual land titles, to work
collectively. HARCs' poor performance record was attributed to the collective mode of
production and to internal mismanagement.

Design of the Analvsis

The analysis begins at the base level of technology. A logit regression examines a range
of factors that influence technology adoption. Stochastic frontier production functions are
estimated for maize and beans. Debreu-Farrell technical efficiency, the ratio of observed output
to optimal output for a given set of inputs, is calculated for each producer from the observed
frontiers.

A producer's response to prices are reflected in allocative efficiency, which measures the
adjustment of input mixes relative to input prices. It is an estimate of costs incurred
unnecessarily given the actual level of technical efficiency. Allocative efficiency is calculated
from an analytically derived cost function.

175

176

In conjunction with other data, profiles of efficient producers are drawn from technical
and allocative efficiencies. The most important aspect of the HARC profile involves the
efficiencies of collective parcels relative to those of individual parcels. Human and social capital
factors are examined by comparing the group means of technical and allocative efficiency
averages. A comparison of advanced and traditional technologies is made by contrasting
advanced maize production with traditional bean production.

Finally, the empirical results are interpreted within a broader institutional model that
examines the viability of internal and external implicit HARC contracts. The model is premised
on the Coasian notion that a firm's existence is not based fundamentally on technology, but on
transaction cost minimization. Economizing action is thus reviewed in transaction components
and governance mechanisms. The model is empirically applied to the notably successful
cooperative Guanchfas, which was cited by many advocates of collectivization as a paradigm
worth replicating.

Summary of the Results

Collective production systems emerged in this analysis as being more technically and
allocatively efficient than individual systems. The collectivity variable in the maize regression
is also positive and statistically significant for average OLS and frontier estimations. These
results counter conventional notions that cooperatives fail because laborers and managers have
incentives to shirk work responsibilities. They also conform to direct survey evidence that
shirking on collective parcels is not observed by HARC members. That collectives are more
efficient reveals an important policy option for transferring technology, improving agricultural
production and integrating the rural poor.

177

That collective parcels are more efficient to the institutional "black box" of the firm
suggests that the internal dynamics of the cooperatives are sound. Mutual agreements of laborers
to carry out work responsibilities is a necessary condition to achieve collective efficiency.
Agreements between HARC managers and workers are also reliable, due to local scrutiny and
the low return associated with managerial shirking at the local level.

However, transactions with support agencies are unreliable due tc the disparate incentives
of HARC members and agency personnel. Commitments with external agencies are not credible
and are not braced by a credible threats. Implicit contracts with external entities do not hold
because HARCs' administration and internal vigilance, unlike the Israeli Kibbutz upon which
HARCs were modeled, lack the necessary human capital to oversee complicated transactions.
The unreliability is reflected in the low allocative efficiencies for maize and in poor marketing
services. HARCs' potential for success is also demonstrated by the cooperatives which contracted
for support from the private sector, most notably Guanchfas.

A prominent result that emerges both in technology adoption and technical and allocative
efficiency is the significance of the proportion of output sold. The more commercialized farmers
become, the more prone they are to correctly adopt new technologies ond the more efficiently
they operate. The positive benefits of commercialization also suggest that HARC members
respond to markets and that profit maximization is a fundamental cooperative goal.

Maize allocative efficiencies are significantly lower than th)se of beans. Maize
production relies on more advanced technology and on a broader range of inputs than bean
production. Unavailability of inputs reduces the allocative efficiency of production in that
producers cannot adjust input mixes to minimize production costs. The low allocative efficiencies
for advanced maize production systems underscore the importance cf effective distribution

178

systems, particularly as the Honduran economy attempts to improve its agricultural technology
and efficiency.

Extension methods in general bear significant influence on technology adoption and
efficiency, as demonstrated by extension coefficients in statistical regressions and efficiency
measures. Personal instruction, unaccompanied by teaching aids, appears most effective in
reaching farmers regardless of their prior education, and may be a substitute for education at low
levels of education. However, other forms of extension, including publication circulation, appear
as complements to different types of extension at higher education levels. Complementarity of
education with certain extension types renders greater flexibility in designing extension programs.
For example, the per unit costs of reaching rural farmers are much lower for publication
circulation than training and visit extension.

Human capital variables yielded predictable results. Investments in health and education
are shown to stimulate technology adoption and improve production efficiency. Experience,
particularly with herbicides and insecticides, also enhances efficiency.

Religion is the only social capital variable that appears to influence efficiency. Social
capital is treated tangentially in this study, as the methodology does not lend itself to examining
complex social fabrics. Nonetheless, social capital is gaining prominence in the economics
literature and constitutes worthy future research with respect to cooperatives.

Recommendations

Policy makers in Central America are faced with the difficult task of balancing social and
economic integration of the rural poor while simultaneously expanding export programs in
response to structural adjustment pressures from international donors. They also face the
challenge of supplying growing urban populations with nontraditional foods that provide the

179

various nutrients of a healtiiy diet. The results which emerge from this study suggest that
cooperatives are an important policy option which may assist them in meeting those objectives.

Cooperatives provide the economies of size that permit the lumoy investments required
by the nontraditional commodities in which Central America has a comparative advantage.
Cooperatives also serve as a proficient means for transferring the advanced technologies needed
to produce those commodities. The important policy question is: Can cooperatives serve as
efficient organizational forms in terms of production? The evidence to date, as measured by
tlnancial performance, is that they cannot.

However, this study shows that cooperatives are organizational forms which enhance
technical and allocative efficiency in production. Cooperative failure is not attributable to
shirking, but to unreliable contracts with support agencies whose incentives are based more on
politics than economics. The results of this study, and successful cooperatives such as Guanchfas
that have received solid private sector support, bear that out. Moreover, HARC members appear
amenable to profitable nontraditional ventures, as demonstrated by the positive influence of
commercialization on performance.

Future Research

Two policy paths could be pursued to address problems that burden HARCs, the details
of which are grounds for future research. The first involves the attraction of private capital and
attendant management expertise, the second the restructuring of support agencies.

The Potential Role Private Capital

Policies designed to attract private capital investments to cooperatives would be beneficial
in meeting the dual needs of rural development and achieving export grcwth. Private managers

180

of capital funds have the incentives to carry out the daily myriad tasks involved in operating a
competitive and complex enterprise. Agreements designed to generate investment returns would
benefit both investors and cooperatives and would serve broader national development goals.

Net social benefits of attracting private capital merit examination relative to those
associated with government assistance programs that are intended to develop poor rural areas.
Perhaps private capital would have to be attracted at some cost, but may be a more efficient way
of achieving social goals than direct government assistance. The mechanisms and incentive
schemes for drawing private capital thus merit investigation.

The Potential Role of NGOs

Restructuring support agencies to be more operationally transparent and to align agency
incentives with HARC incentives would be beneficial. Perhaps non-governmental organizations
(NGOs) could lend assistance in this endeavor. NGOs dedicate dependable but meager resources
to directly attack underdevelopment and often accomplish more than government agencies. If
NGOs could direct their scarce resources toward improving the functioning of government
support, not in decision-making but in the auditing necessary to insure that those decisions are
carried out, the pay-off would be much higher.

NGOs assemble a great deal of expertise capable of conducting the types of simple audits
required by HARCs. Transferring human resources from direct de\elopment assistance to
auditing government development programs would have a multiplicative effect on NGO efforts.
It would combine meager NGO funding with government funding to secure the fulfillment of
government development goals. Future research could examine how NGOs could be employed
to complement ongoing government programs.

APPENDIX I
DATA AND STUDY AREA

Integrated Pest Management Program of Honduras CMIPH')

The Integrated Pest Management Program (Spanish acronym MIPH) mounted a three year
pest management training and extension program in 1985. Operating through the Pan-American
Agricultural School (Spanish acronym EAP) in Zamorano, Honduras, MIPH provided four
different training techniques to 27 randomly selected HARCs in the El Parafso and Olancho
regions of Honduras. HARCs were randomly divided to receive different types of training with
respect to agronomy and pest management. One group was set aside with no training to serve
as a control group against which extension efforts could be measured. The training types were:

1 . Printed material only

2. Lectures only

3. Lectures and printed material

4. Lectures, printed material and electronic visual aids.

The Sample

MIPH selected a sample of HARCs between 1985 and 1988 to participate in the pest
management program. The HARCs were chosen at random by .extension agents, then
subsequently and randomly assigned to receive one of the above training techniques.

181

182

Data on the groups analyzed in this study were gathered between November, 1987 and
June, 1989. A two-month sondeo was conducted at the outset to determine the strategy for
surveying in light of the proposed research objectives and the availability of logistical support.
All the cooperatives were contacted during the sondeo to secure their agreement to record data
for a one year production cycle.

Fieldwork was carried out through the primera (the heavier of two rainy seasons which
occurs from May to August) and postrera (September to December) production seasons of 1988 -
89. Corn is the principle crop in primera and red beans are grown in postrera. Crossectional
data were gathered for one production season. Fortunately, both primera and postrera brought
good to average rains during the data gathering period.

MIPH randomly selected the HARCs from among basic grain cooperatives in the two
regions. The types of training offered to the HARCs were also selected on a random basis. The
data gathered comprise a sample of basic grain HARCs, but the entire population of HARCs and
HARC members who participated in the MIPH program.

Most of the HARC members had an individual corn plot and over half had an individual
bean plot. Individual production data were collected by literate coop members or children of
coop members trained in each cooperative to maintain investment records on all activities
pertaining to individual land parcels.

Gathering production data is a difficult task, made more challenging by the distrust that
people naturally feel about revealing economic and financial records. Cooperatives provide an
excellent network for collecting accurate data in that trust need not be established with every
individual but just with someone trusted within the cooperative. Although the author met every
HARC member in this study, personal relations were more closely - and efficiently - cemented

183

with a trusted person within the HARC who could observe production practices and elicit the
confidence necessary to obtain accurate records.

Nonetheless, it would be imprudent to argue that distrust was totally allayed, but the
establishment of trust and personal relations - that began with many HARCs during my Peace
Corps service - significantly improved the accuracy of data that would be offered to enumerators
unfamiliar to HARC members. It should be noted that collective yield data were the most
challenging to gather, in that outstanding debts threatened the extraction of surplus revenues if
such information were divulged to debtor institutions. The provision of yield data on individual
production posed little if any risk. Input records were also readily available as most farmers
enjoy talking about their individual production practices. Lending institutions maintained records
of coop purchases for all collective and some individual parcels.

Human capital and demographic data were gadiered over a period of three months in
1989. The survey was designed through interviews with HARC members and extension
personnel from MIPH and government agencies. It was tested extensively in cooperatives that
were not included in the sample but operate in the sample areas.

Of the 27 HARCs in the sample, 19 had a fully collective maize parcel and 25 had
production systems that were completed under individual responsibility. The distribution of coop
size in terms of membership and land access varied. Table AI.l compares nationwide average
with sample averages for member and landholdings per asentamiento and landholdings per socio.
Table AI.2 provides a breakdown of asentamiento names, members and land access per group
and per socio.

184

Table AI.l. Asentamientos by name, membership and land access
Group Members Collective Individual

Total

Per Soci

Ideas en Marcha

1 A

1 AA

100

100.00

7.14

El Boqueron

74.00

6.17

Empalizada

77.00

4.81

El Benque

5.00

0.71

Los Bienvenidos

44.5

12.5

57.00

2.48

bl tsfuerzo

140

140.00

5.83

Los Peregrines

1 o

102.00

5.67

Esquilinchuche

16.00

1.45

San Nicolas

11.5

23.50

3.36

Los Almendros

80.00

5.71

La bsperanza

102

132.00

7.33

Santa Cruz

1 o

92.00

5.11

L.ayo tsianco

40.00

4.44

Z/Opiiotepe

75.00

6.82

uudyiuuroS

An
47

47.00

7.83

Ld v^oncepcion

1 O

168.00

4.42

San Juan de Linaca

A O

62.00

1.29

La Puzunca

90.00

6.00

Tempiscapa

24.00

3.43

La Providencia

115

160.00

5.33

19 de Abril

52.00

2.26

El Coyolar

40.00

3.08

El Plomo

8.5

54.50

6.06

Los Dos Naranjos

110

180.00

12.86

Los Venecianos

32.00

4.00

La Libertad

60.00

4.29

Montanuelas

28.00

2.80

185

Table AI.2. Comparison of sample averages with national averages

Land per
Asentamiento

Socios per
Asentamiento

Land per Socio

Nationwide

212.98
(154.35)

22.44
(8.8)

9.04
(2.76)

Sample

90.52
(53.35)

16.04

(9.75)

8.27
(5.86)

The Surveys

Quantifiable production and demographic data were gathered in the regions of Olancho
and El Parai'so, Honduras. General information was also gathered as a byproduct of the
numerical data obtained for statistical analysis. These regions share similar terrain and cultural
characteristics. Data were recorded on the entire gamut of cooperative operations. The human
survey instrument (appendix) was designed to obtain information regarding the health and
educational background of each HARC member, his living conditions and social affiliations with
the cooperative. The purpose of collecting data regarding the personal characteristics of HARC
members and facets of social interaction was to distinguish features that influence HARC
efficiency and operations.

Short to long-term endogenous factors were surveyed to facilitate the delineation of
policies that improve HARC efficiency and performance. Besides short-term IPM training
techniques, longer term components such as schooling, housing and health data were gathered
to amplify the explanatory power of statistical modeling. Exogenous factors such as age, family
size and types of social interaction were also included to render information regarding the

186

responsiveness of characteristic clusters and thus determine, apriori, which groups are more
inclined to operate efficiently and are relatively more amenable to extension services.

A test regarding integrated pest management techniques was £lso administered in the
survey to examine the effectiveness of the varying training techniques tc which the cooperatives
were exposed. Farmers were never asked directly if they adopted a given technology, as such
questions are known to bias responses. Rather, they were asked open-ended questions free of
suggestions about their production and pest management practices. Responses were scored as
correct only if they conformed to the instructions given by MIPH.

All individual data take the household parcel or parcels, not the household itself, as the
unit for which all inputs and activities were measured. Financial resources simply did not permit
measurement of all household activities. The argument could be made that competing household
production activities will bear an influence on efficiency and adoption measurements. The
relative degree of importance that the individual parcel plays in the household utility function
could vary, rendering the coefficients vulnerable to bias and an overestimation of the disturbance
variance. However, it is reasonable to assume that opportunities available to agrarian reform
households are minimal. If they were not, they could not participate in the reform. The only
activity that may compete with other activities is coffee harvesting. But this occurs primarily in
the first three months of the year, when most basic grains have been harvested. Moreover, given
the intensity of land disputes, the efficiency of land units, not household units, assumes primary
importance. The number of outside economic endeavors is documentet! in the human resource
survey and may, through the inclusion of dummy variables, account for some efficiency variation.

Observations were made on cooperative operations throughout the data gathering period.
It was necessary to attend dozens of cooperative meetings and maintain close contact with support
agencies in order to obtain data and information. Close association with the cooperatives and

187

cooperative agencies provided an excellent opportunity to observe how actual HARC performance
deviated from desired HARC performance. Amiable assistance from MIPH and government
agronomists was invaluable in corroborating data to account for discrepancies and ensure data
reliability. Such observations will be useful in interpreting statistical results.

APPENDIX II
FIELD SURVEY

ENCUESTA DE RECURSOS HUMANOS
Grupo

Encuestador: Fecha / / Hora :

I INFORMACION GENERAL
\. Nombre

2. Edad

4. Dirreccidn

5. Estado civil Casado

Soltero
Viudo

6. ^Donde Nacid? Jamastran

El Sur
Guayape
Linaca
Otro:

8. Sf no naci(5 en esta zona:

iQuQ afio lleg(3 aquf a esta zona?

9. Ano que se uni(3 el grupo

10. Cargo en el grupo

desde

11. Cargos que ha tenido: Presidente: aiios

Vice Presidente: aiios

Ttisorero: aiios

Secrataria: aiios

188

189

12. (,Antes de hacerse socio del grupo,
que hacia usted para ganar la vida? .

Asdariado Alquilaba tierra
Otro:

13. (,Cree usted que ser miembro del grupo aumenta(A),

baja (B) o no cambia (N) lo siguiente?: Seguridad

Consumo de comida

Sueldo

Dignidad

14. Numero de miembros de la casa:

Rela-

Nombre ci(3n Edad Educ Pep Nombre

1
2
3
4
5
6

* HO = hijo, HNO = hermano
II. PRODUCCION

1. ^.Cuantos anos tiene de trabajar con

Rela-
cidn Edad Educ Pep

J L

semillas mejoradas en bolsa?

herbicidas?

veneno de plagas?

abono?

;Relcalque mucho que las preguntas 2-24 referien solamente a la arcela individual
por la cual el archivero llevo el control! ;Ubique al asociado al:a mentalmente en
una manera conversacioal
y por cada pregunta refieranse a esa parcela!

2. Por cada uno de los siguientes insumos preguntele al asociado si utilizd el producto o no en
su parcela individual Si contesta "no" escriba "no" a la derecha del colon, y si contesta "sf"
ponga el numero de aiios tiene de trabajar con tal producto a la derecha del colon

190

3. (,Utiliz(5 otros insumos que no estan mencionado arriba? Sf No

Si contesta "si." ,;,CuaIes son?

: 9 : 9 : >

4. ^Como prepard la tierra de su parcela individual? Tractor

Bueyes

Azaddn
Barreta

5. (.Cuantos pases de arado hizo en primera en su parcela individual?.

6. (.Cuantos pases de rastra hizo en primera en su parcela individual?.

7. iQue tipo de arado utiliz6 en su parcela individual? Disco

Vertedera
Row plow
De palo

8. iCon que surque<3 la labranza? Bueyes?

Maquina?
No surqued

9. ^En su milpa individual que distancia tiene entre: surcos?

posturas?

10. i,Cuantas semillas puso por postura

(por ej. 2:3 O 3:3) en su parcela individual en: maiz? :

friiol? :

1 1 . En su parcela individual sembrd frijoles en Primera

Postrera

12. Para usted: ^Cuantas barras cuadradas tiene una tarea?

iQUE NO LEA A LOS ASOCIADOS LAS RESPUESTAS DE PREGUNTAS SOBRE
LAS PLAGAS #13 - #22 (O SEA JUEGOS DE RESPUESTAS QUE SON TRAZADAS!)
DEJE LA PREGUNTA ABIERTA PARA QUE CONTESTE EN SU PROPIA MANERA.

13. Sigamos en la misma parcela individual.

/■Antes de encontrar algunas Gallinas Ciegas

este ano, hizo algo usted para prevenirlas ? No hizo nada

Prepard bien el suelo

Aplicd veneno

Otro:

191

i,La Gallina ciega infestd esa parcela este ano? Sf No

Si contesta "No" pasen a #14

^Hizo muestreo? Sf No

^Cuantas tareas de a _ se le infestd?

^,Como la combatid usted? No hizo nada

Prepard bien el suelo

Aplicd veneno

Otro:

^.Logrd controlaria? Sf No

14. Sigamos en la misma parcela individual.

(,Antes de encontrar algunos Cogolleros

este ano. hizo algo usted para prevenirlos? No hizo nada

Lluvia los matd

Aplicd veneno.
Otro:

^El Cogollero infestd esa parcela este ano? Sf No

Si contesta "No" pasen a #15

^Hizo muestreo? Sf No

(.Cuantas tareas de a _ se le infestd?

i,Como lo atacd usted? No hizo nada

Lluvia lo matd

Aplicd veneno

Otro:

i,Logrd controlarlo? Si No

15. Sigamos en la misma parcela individual.

( Antes de encontrar algunas langostas

este ano, hizo algo usted para prevenirlas? No hizo nada

Cruzd la milpa
Controld zacate

Aplicd veneno

aro:

iha Langosta (Gusano Medidior)infestd esa parcela

este ano? Sf No

Si contesta "No" pasen a #16

(,Hizo muestreo? Sf No

^.Cuantas tareas de a _ se le infestd?

^Como la atacd usted? No hizo nada

Cruzd la milpa
Controld zacate

■Aplicd veneno.
Otro:

(.Logrd controlaria?

Sf No

192

16. Sigamos en la misma parcela individual.
(;,Antes de encontrar algunas Babosas
este aiio, hizo algo usted para prevenirlas ?

;Cuando?

. . . . No hizo nada
Cebo

Controld malezas
Basura trampa
Matanza nocturna
Prepard terreno
Quema rapido

Otro:

En primera

En postrera

iLa Babosa infestd esa parcela este aiio?Si No
Si contesta "No" pasen a #17

^Hizo muestreo? Sf No

^Cuantas tareas de a _ se le infestd?

(.Corno la atacd usted? No hizo nada

Cebo

Controld malezas
Basura trampa
Matanza nocturna
Quema rapido
Otro:

^.Logrd controlarla? Si No

17. Sigamos en la misma parcela individual.

( Antes de encontrar algunas tortugillas
este aiio, hizo algo usted para prevenirlas?

No hizo nada

Prepard bien el suelo
Insecticida

Otro:

La Tortugilla infestd esa parcela este aiio? SI No

Si contesta "No" pasen a #18

^Hizo muestreo? SI No

i,Cuantas tareas de a _ se le infestd?

(,Como la atacd usted? No hizo nada

Insecticida

Otro:

t,Logrd controlarla?

Si No

193

18. Sigamos en la misma parcela individual.

^ Antes de encontrar algunas empoascas

este aiio, hizo algo usted para prevenirlas ? No hizo nada

Lluvia la maX6

Insecticida

Otro:

;,La Empoasca infestd esa parcela este ano? Sf No

Si contesta "No" pasen a #19

^Hizo muestreo? Sf No

^Cuantas tareas de a _ se le infest(5?

^Como la atac6 usted? No hizo nada

Lluvia la mat(3

Insecticida

Otro:

^,Logr6 controlarla? Sf No

19. Sigamos en la misma parcela individual.

(,Antes de encontrar algunas picudos de la vaina

del frijol este aiio, hizo algo usted para prevenirlos? No hizo nada

Controld malezas

Destruyd rastrojos
Control quimico

Otro:

iEl picudo de la vaina del frijol

infestd esa parcela este afio? Sf No

Si contesta "No" pasen a #20

iWizo muestreo? Sf No

^Cuantas tareas de a _ se le infestd?

^Como lo atac6 usted? No hizo nada

Controld malezas
Distruyd rastrojos

Control quimico

Otro:

(.Cuando lo hizo?

t,Logrd controlarlo? Sf No

20. iOtro plaga?

^.Cuantas tareas de a _ se le infestd?

^Como lo controls?

194

iOtro plaga?

(.Cuantas tareas de a _ se le infest(3?
^Como lo control^?

21. Sigamos en la misma parcela individual. ^El zacate infestd esa parcela

en el tiempo critico del desarroUo del mafz Sf No

22. Sigamos en la misma parcela individual. ^EI zacate infestd esa parcela

en el tiempo critico del desarrollo del frijol Sf No

23. Sigamos en la misma parcela individual.

i,La hoja ancha (monte o hierba) infest(5 esa parcela en

el tiempo critico del desarrollo del mafz Sf No

24. Sigamos en la misma parcela individual.

t,La hoja ancha (monte o hierba) infesto esa parcela en

el tiempo critico del desarrollo del frijol Sf No

25. (.Que opina usted?

(,Cual m^todo de produccidn pretlere en la cooperativa? Colectivo

Individual
Los dos

III. EDUCACION DEL SOCIO

1. Anos cumplidos en la escuela primaria

secundaria

nocturna

2. ^Participd en la campaiia de alfabetizacidn? Sf No

3. ^Sabe leer usted (como periodico)? Sf No

4. ^Sabe escribir usted? Sf No

Si contesta "sf" a #3 o #4:

i,Donde lo aprendi(3?

5. i,Sabe su madre leer? Sf No

i,Sabe su padre leer? Sf No

6. Cursos de capacitacidn que ha recibido en cuanto a:

cooperativismo.
agricultura

195

8. ^,Usted ya sabe mucho de la agricultura,
de donde ha aprendido lo mas?

INA Parientes Trabajando en finques grandes
RR.NN. Experiencia Buenos agricultores
MIPH Socios Otro:

9. i,De donde ha aprendido mas sobre el manejo de plagas?

INA Parientes Trabajando en finques grandes
RR.NN. Experiencia Buenos agricultores
MIPH Socios Otro:

IV. AFILIACIONES SOCIALES

1. (,Tiene usted parientes quienes son socios del grupo? Sf No

Numero de:

hermanos cunados

primos suegros

hijos yernos

padres tios

sobrinos

2. (.Pertenece usted a alguna religion? Sf No

si contesta "no" pasen a #3

^.Cual religion? Catdlico

Evangel ico
Otro

3. (,Participa usted en actividades deportivas

con otros socios del grupo? Sf No

si contesta "no" pasen a #4

i,Cuales depones? Futbdl

Dados

Naipes
Billar
Otros

4. ^Participa usted en actividades musicales

con otros socios del grupo? Sf No

si contesta "no" pasen a #5

5. ^Participa usted en actividades religiosas

con otros socios del grupo? Sf No

i,Cual religion? Catdlico

Evangel ico
Otro_

196

6. t,Tiene hijos que participan en actividades

con hijos de los otros socios del grupo? Nada

Deportes
Religion
Escuela
Otro:

7. (,Puede identificar usted el miembro del grupo quien
tiene la mayor influencia (no necesariamente un oficial)? Si No

Si contesta "sf:" ^.Quien es?

V. MEDIDAS DE SALUD

1 i,De donde consigue el agua de la casa? Rio

Pozo
Llave
Quebrada
Otro:

2 iSt hierve el agua que se bebe en su casa? Siempre

A veces
Solo bebidas calientes

3 (.Que tipo de piso tiene su casa? Tierra

Cemento
Madera
Otro

4 iQue tipo de pared tiene su casa? Adobe

Madera
Bloque
Ladrillo

5 (.Que tipo de techo tiene su casa? Texas

Asbestas
Zinc
Zacate

6 (.Tiene huerto de hortalizas? Sf No

i.Cuales son? papa chile repollo

cebolla rabano tomate

yuca remolacha otro:

pepino zanahoria otro:

7 ^Tiene usted arboles de frutas?

i,Cuales son?

guineos

aguacate

mango

naranja
toronja
maranon

otro:

8 (,Como se guarda maiz en su casa?

9 (,Como se guarda frijoles en su casa?

10 ^Como se guarda arroz en su casa?

1 1 i,Cuantos dlas de trabajo perdid usted este ano por enfermedades?
(Esto incluye enfermedades de usted o de un pariente o amigo

a quien usted tuvo que cuidar)

13 ^,Cuantos animal es tiene?

toros , vacas , bueyes , cerdos , burros ,

polios , caballos , pavos , perros , mulas

14 ^Ademas de la siembra tiene otros ingresos?

198

VI. MATRICES DE COLORES:

Vista %, +

Hora:

1_
2_
3_
4_
5_
6_
7_
8_
9_
10_
11_
12

Hora:

Altura cm

Peso libras

Brazo cm

Pierna

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BIOGRAPHICAL SKETCH

Michael Martin was born and raised in Des Moines, Iowa. He graduated from the
University of Iowa in August, 1977, with a bachelor's degree in economics. He worked as a
coop advisor with the Peace Corps in El Salvador and Honduras from 1979 to 1982.

He enrolled in the Agricultural Economics Department at the University of Wyoming
in 1983. In 1985 he conducted tleldwork and research in Somalia to fulfill the requirements
for a Master of Science degree.

He enrolled in the Food and Resource Economics Department at the University of
Florida in 1985. In 1988, he returned to Honduras to gather data for his Ph.D. thesis from
the cooperatives with which he had worked as a Peace Corps volunteer. His doctorate was
awarded in December, 1996.

211

I certify that I have read this study and that in ray opinion it conforms to acceptable
standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation
for the degree of Doctor of Philosophy.

timothy G. Taylor, Chair
Professor of Food and Resource
Economics

I certify that I have read diis study and that in my opinion it conforms to acceptable
standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation
for the degree of Doctor of Philosophy.

UmaLele, Co-Chair
Graduate Research Professor
Professor of Food and Resource
Economics

I certify that I have read this study and that in my opinion it conforms to acceptable
standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation
for the degree of Doctor of Philosophy.

Chris O. Andrew
Professor of Food and Resource
Economics

^lies L. Scale, Jr.
Professor of Food and Resource
Economics

rdi

'of History

This dissertation was submitted to the Graduate Faculty of the College of Agriculture and
to the Graduate School and was accepted as partial fulfillment of the requirements for the degree
of Doctor of Philosophy. f\

December, 1996 Dean, College of Agriculture

Dean, Graduate School

i
it