The influence of natural resource endowments on the economics of high country pastoral farming

Abstract

The study examines how high country pastoral enterprises might have their economic efficiency affected by differences in their land resources. Its approach is to make use of landform-soil classification of high country runs and to attempt comparable econometric analyses of resulting groups of runs. These groups are described in terms of their physical landform-soil characteristics, their pastoral utilisation, management inputs and livestock production. Cobb-Douglas production functions are calculated from physical input data and standardised-value output data, both derived from a recent complete enumeration survey of high country runs.

Results reveal close correlations within run groups between wool and livestock output and numbers of stock units. Preference is therefore given to forms of Cobb-Douglas functions which examine the influence of other variables such as land area, land development, labour and fertiliser, without taking account of livestock numbers.

Different groups were found to have output differently influenced by different variables. Proportions of variation explained by comparative equations or best fit equations were generally greater for individual groups than for aggregates of groups. Most groups were found to have sums of elasticities clearly greater than 1, indicating increasing returns to scale. Two groups were found to be operating in conditions of increasing returns to labour.

Reservations are indicated concerning the general validity of this particular economic analysis as a representation of current pastoral economies. However the usefulness of the run classification and the value of econometric models are both clearly indicated as aids to improved pastoral management and administration.