THE SUBSTITUTIONALITY OF PRODUCTION FACTORS IN POLISH COMMERCIAL FARMS ORIENTED TOWARDS CROP PRODUCTION

Abstract

The objective of this study was to assess the substitution of labour for capital in the Polish commercial farms oriented towards crop production in the years 2009–2011. The study was developed on the basis of empirical unit data of the Polish FADN regarding commercial farms classified as the “Fieldcrops” group. The results were presented in comparison with the farms pursuing mixed production, which in the FADN are referred to as “Mixed”. The study used the Cobb-Douglass production function method. Based on the flexibility ratios, reflecting the degree of proportionality of revenue in relation to the analysed factors, it can be inferred that the farms in question displayed a growing efficiency of total inputs in the reference years. However, the analysis of the substitution of labour for capital in the surveyed farms oriented towards crop production revealed less favourable results, in terms of the achievement of the economic objective in 2009–2011. The results indicate that the substitution of labour for capital in the analysed period was effective in both types of farms. The comparative analysis of the marginal rates of substitution reveals that the substitution of labour for capital was more favourable in the “Fieldcrops” group than in the “Mixed” type farms in 2011. In order to substitute one man-hour, an average “Fieldcrops” farm had to increase its capital by PLN 5.98 in 2009, by PLN 6.88 in 2010 and by PLN 2.55 in 2011 whereas in the “Mixed” type farm it was PLN 2.12, PLN 2.91 and PLN 2.89, respectively.

Keywords: Cobb-Douglas production function, commercial farms, production factors.

Article DOI: http://doi.org/10.15544/RD.2015.021