Research at UAF - Economics of adopting Bt cotton: evidence from Pakistani Punjab
Principal Investigator(s): Dr. Khuda Bakhsh
Department of Environmental and Resource Economics
Phone: (Off) + 92 41 9200161-9 Ext 2808
E-mail: Mob: 03006693012
Co-Principal Investigator: Nil
Duration: October 31, 2008-July 31, 2010
Cost: Pak Rs 12.97 Millions
Funding agency: South Asian Network for Development and Environmental Economics (SANDEE), Nepal

Progress Reports

The project has been designed to analyze the economic performance of Bt cotton seed along with traditional cotton seed and to determine possible reduction in pesticide use, if any due to adoption of Bt cotton seed in the irrigated districts of Punjab province of Pakistan. An effort is made to compare cost, yield and revenue of cotton growing farmers over a period of time. It aims at to determine the impacts of factors on yield of cotton growers in the study area by using suitable production function. Reduction in pesticide use can result in decline in cost of production on one hand and less health hazards on the other hand. Keeping in view this important environmental aspect, the project intends to work out economics of adopting Bt cotton.
Problem statement
Bacillus thuringiensis (Bt) cotton, having resistance to several insects and pests, especially bollworms has been adopted in many developed and developing countries. USA, Australia, China, Mexico, Argentina, South Africa, and India have allowed the cultivation of Bt cotton at commercial level (Qaim, et al., 2006). Quite a lot of studies conducted in the developing countries provide strong evidences in the favor of adoption of Bt cotton. Thirtle, et al. (2003), Qaim and de Janvry (2005), Qaim and Matuschke (2005), Qaim, et al. (2006), Bennett, et al. (2006) concluded that the farmers who had cultivated Bt cotton harvested higher yields at reduced pesticide usage. Reduction in pesticide application caused substantial decline in cost of production.
Pakistani cotton growers are experiencing rising cost of production, mainly due to increased use of pesticide. So, the rising cost of production points out that there is a dire need to reduce cost of production of cotton growers so that the cotton growers could compete in the world market, especially in the era of trade liberalization and globalization. Adoption of Bt cotton could help in this regard.
However, limited research work has been conducted in Pakistan on this issue. Mostly, studies have information of limited scope (Hayee, 2005; PARC, 2007), since cross sectional single year data have been employed. The issue of trying to look at cross sectional single year data is questionable. Thus, a time series dimension is more appropriate to decide whether Bt cotton performs better than non-Bt cotton and how much economic benefits would be available to farmers when they adopt it. Therefore, the present study will make the assessment of the performance of Bt cotton on farmers’ field for a period of two crop seasons. The study will provide an analysis of data collected from a large sample of farmers growing Bt cotton and non-Bt cotton seeds. This study would provide evidence whether adoption of Bt cotton has positive or negative impacts on productivity. It would provide an insight whether Bt cotton should be commercialized on large scale. It would help researchers to initiate new research and development in evolving new Bt varieties.
Comparatively of the two types of cotton seeds, namely Bt cotton seed and non-Bt cotton seed are practiced in Pakistan. Bt cottonseed is supposed to give higher returns due to reduced use of pesticide. Comparative economics of these two types of cotton seeds requires to be studied in the province of Punjab, being the main suppliers of raw cotton to textile industry in Pakistan. Bt cotton seed is available in the market with its given price, although it was unapproved at the time of data collection. Now farmers have the choice either to adopt Bt cotton at prevailing market price or not to adopt it. The first question is whether adoption of Bt cotton seed leads to decline in pesticide use in cotton production?
Whether yield and revenue generated from Bt cotton is higher than yield and revenue from non-Bt cotton?
Based on the above research questions, objectives of the study include to determine whether adoption of Bt cotton has reduced pesticide use on the farmers’ fields and to estimate the possible change in yield and revenue for farmers who have adopted Bt cotton.
Many studies estimated the agronomic and economic effects of Bt cotton by comparing output and inputs, yield, variable cost and gross margin between Bt cotton and non-Bt cotton (Qaim et al. 2006, Bennett et al. 2006, Qaim, 2003, Huang et al. 2002) without considering the time effect of technology on cotton yield. In the present study, agronomic and economic effects of Bt cotton adopters of various groups (Groups B and C) are compared with Group A (non-Bt cotton plots) and this type of comparison helps to identify the time of effect of adoption of Bt cotton technology on farmers’ yield and income.
Comparative statistics provide a broad overview about the agronomic and economic effects of Bt cotton. However, such statistics become less effective in separating the effects of individual changes while controlling for the effects of other variables. Individual effects of variables while controlling for the effects of others can be estimated by employing a multiple regression (Bennett et al., 2004). In this regression, crop yield is taken as the dependent variable and inputs are taken as the independent variables and it is the case of production function providing better characterizations. Therefore, production function will be used to further explore relationship between cotton yield per acre and various production inputs, such as pesticide use, fertilizer, irrigation, labour, etc.
Estimating profit function at the farm level involve regressing variable profit (total revenue minus variable costs) on input and output prices and fixed factors specifically relating to the concerned farms. In the present study, gross margins are regressed on input and output prices and other fixed factors, suggesting that variables explaining gross margins are similar to those used in estimating profit function (Bennet et al., 2004). A fixed effect gross margin function is estimated like that of production function.
Results and Discussion
Analyses of the study data is in process
Conclusions of the study will be made after finalization of the analysis
Still in the process