Dinar Keck 1997 Private Irrigation Investment in Colombia Effects of Violence Macro Economic Policy...

8/3/2019 Dinar Keck 1997 Private Irrigation Investment in Colombia Effects of Violence Macro Economic Policy and Environm

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ELSEVIER A g r i c u l t u r a l E c o n o m i c s 1 6 ( 1 9 9 7 ) 1 1 5AGRICULTURALECONOMICS

Pr iva te i rr iga t ion in ve s tm e n t i n Co lom b ia : e f f e c t s o f v i o l e n c e ,m a c r o e c o n o m i c p o l i c y , a n d e n v i r o n m e n t a l c o n d i t i o n s

A r i e l D i n a r *, A n d r e w K e c kA g r i c u lt u r e a n d N a t u r a l R e s o u r c e s D e p t ., T h e W o r l d B a n k . 1 8 1 8 H S t r ee t N W , R o o m $ 8 0 3 9 . W a s h i n g t o n . D C 2 0 4 3 3 , U S A

A c c e p t e d 2 3 S e p t e m b e r 1 9 9 6

A b s t r a c tT h i s p a p e r i d e n t if i e s a n d e s t i m a t e s t h e e f f e c t s o f s e v e r a l d e t e r m i n a n t s o n p r i v a te i n v e s t m e n t in i r r i ga t i o n i n C o l o m b i a . I t a t t e m p t s t o

q u a n t i f y m a c r o e c o n o m i e p o l i c y , e n v i r o n m e n t , a n d v i o l e n c e v a r i a b l e s t h a t h a v e b e e n i d e n t if i e d i n p r e v i o u s s t u d i e s a s s i g n i f i c a n t l y a f f e c t i n gi n v es t me n t i n ag r i cu l t u re i n g en e ra l , an d i n i r r i g a t i o n in p a r t i cu l a r. V a r i ab l e s su ch a s v i o l en ce , c l i ma t e , an d g o v e rn me n t a l p r i ce an d c red i tp o l i c i e s a r e u s e d t o e x p l a i n c h a n g e s i n p r i v a t e i n v e s t m e n t i n i r r i g a t i o n a c r o s s r e g i o n s a n d o v e r t i m e . V i o l e n c e n e g a t i v e l y a f f e c t s p r i v a t ei n v e s t m e n t . C l i m a t e a f f e c t s t h e i n v e s t m e n t s u c h t h a t i n r e g i o n s w i t h f a v o r a b l e c l i m a t e c o n d i t i o n s , i n v e s t m e n t i n i r r ig a t io n i s l e s s a t tr a c t iv e ,a n d a p p r o p r i a t e g o v e r n m e n t c r o p - p ri c e a n d c r e d i t p o l i c i e s p r o m o t e i n v e s t m e n t in i r r i g a ti o n .

1. B a c k g r o u n dW a t e r p o l i c i es h a v e b e e n d e s i g n e d i n m a n y c o u n -

t r i e s a r o u n d t h e w o r ld , i n c lu d in g L a t i n A me r i c a nc o u n t r i e s s u c h a s Co lo mb ia , a s a me a n s t o p r o mo ted e v e lo p me n t a n d t o p r o v id e t h e p o o r i n r u r a l a r e a sw i th a f f o r d a b l e l a n d a n d w a t e r r e s o u r c e s ( W o r ldBa n k , 1 98 8 ). T h e l o n g - t e r m h e a v y i n v e s tm e n t sn e e d e d t o c a r r y o u t t h e s e p o l i c y o b j e c t i v e s h a v en e c e s s i t a t e d t h e d i r ec t i n v o lv e m e n t o f th e s t a t e. T h i sh a s b e e n d o n e v i a s e v e r a l w a t e r - r e s o u r c e s a d min i s -t r a t i o n s y s t e ms c h a r a c t e r i z e d ma in ly b y h e a v y p u b l i ci n v e s t m e n t an d m a n a g e m e n t ( U N , 1 9 91 ).

Re c e n t l y , s e v e r a l c o u n t r i e s , i n c lu d in g c o u n t r i e s i nL a t i n A m e r i c a ( e .g . Ch i l e , Co lo m b ia , M e x ic o ) , r e a l -i z in g l o c a l w a t e r s h o r t a g e s a n d i n e f f i c ie n c i e s o f e x -i s ti n g w a t e r m a n a g e m e n t a r r a n g e m e n t s , h a v e c o n s i d -e red changes in the i r ex is t ing wa te r r e sources ins t i tu -

* Co rr e sp o n d i n g au t h o r . Te l . : (2 0 2 ) 4 7 3 0 4 3 4 ; fax : (2 0 2 ) 5 2 21 14 2; e m a i l : a d i n a r @ w o r l d b a n k . o r g .

t i o n s . Su c h c h a n g e s i n c lu d e p r o mo t in g a g r e a t e ri n v o lv e me n t o f u s e r s , a n d e n c o u r a g in g p r i v a t e i n -v e s tme n t s i n t h e w a t e r - s u p p ly a n d i r r i g a t i o n s e c to r s .I n C o l o m b i a , f o r e x a m p l e , t h e n e w w a t e r l aw( H I M A T , 1 9 9 3 a ) r e o r g a n i z in g t h e r o l es o f t h e p ri -v a t e s e c to r i n i r r i g a t i o n a n d d r a in a g e p r o v id e s a d d i -t i o n a l i n c e n t i v e s f o r p r i v a t e i n v e s tme n t , a n d a d -d r e s s e s i n c r e a s e d r e s p o n s ib i l i t y a n d ma n a g e me n t o fuse r a ssoc ia t ions . Al though the publ ic sec tor i s s t i l li n v o lv e d i n ma jo r i n v e s tme n t s , i n s u c h p r o j e c t s a sw a t e r r e s o u r c e d e v e l o p m e n t a n d c o n v e y a n c e s y s -t e ms , t h e p r i v a t e s e c to r i s i n c r e a s in g ly t a k in g o v e rin v e s tm e n t s i n s e c o n d a r y a n d t e r t ia r y i r r i g a t io n - w a te rc o n v e y a n c e s y s t e m s , a n d i n f a r m - l e v e l i n v es t m e n t .

M a k in g p r i v a t e i n v e s tme n t i n i r r i g a t i o n mo r e a t -t r a c t i v e m a y b e o n e o f t h e g o v e r n m e n t ' s p o l i c yo b j e c t i v e s . P r e v io u s r e s e a r c h o n p r i v a t e i n v e s tme n tin i r r i g a t i o n r e f e r r e d t o e c o n o mic , e n v i r o n me n ta l ,a n d e s p e c i a l l y f a r m- l e v e l o r g a n i z a t i o n a l p a r a me te r s .A p p a r e n t l y , t h e r e a r e a d d i t i o n a l f a c to r s t h a t ma ya f f e c t i rr i g a t io n i n v e s tme n t d e c i s io n s . F a c to r s s u c h

0 1 6 9 - 5 1 5 0 / 9 7 / $ 1 7 . 0 0 C o p y r i g h t 1 9 97 E l s ev i e r S c i e n c e B . V . A l l r i g ht s re s e r ve d .P II S 0 1 6 9 - 5 I 5 0 ( 9 6 ) 0 1 2 1 5 - 7


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2 A. Dinar, A. Kec k/A gri cul tur al Economics 16 (1997) 1-1 57 5 0 - Total I r r igated area700 - '6 50 . . " " . . " " ' " ' "600~" 550- ,,o 500 "* Area unde r pdvale i n v e s t m e n tO ."450- . '"~ 400 / o

< 3 5 0 --o 300- under publl0 nvestment2 5 0 - " . " - - , , ' J r " . . . . . . . . - e * a t m200 ~ ." y5 0- j ~ , ~ . , . . . , . .I 0 0 . . , ~ . , e5 0 - " ~ ,0 '-5 0 ! !1945 1;55 19 '65 1975 ! ;85 1995Y e a r

Fig . 1 . To ta l i r r ig a ted a rea , an d a rea o f p ro jec t s u n d e r p u b l ic an d p r iv a te in v es tmen t in Co lo m b ia (1 9 4 5 -1 9 9 0 ) .

as v i o l en ce , l e ad i n g t o u n ce r t a i n t y i n t h e i n v es t m en ta n d t h e p r o d u c t i o n p r o c e s s , m a y b e t h e o v e r a r c h i n gd e t e r m i n an t s i n t h e i n v es t m en t - d ec i s i o n p r o ces s i nm a n y c o u n t r i e s . E v i d e n c e t h a t v i o l e n c e i s a n i m p o r -t an t f ac t o r i n i n v es t m en t d ec i s i o n s , an d d a t a t o s u p -p o r t i t , ex i s t i n C o l o m b i a .

A l t h o u g h t h e ex i s ti n g b o d y o f em p i r i ca l s t u d i e s ,t o d a t e , p r o v i d es a b e t t e r f u n d am en t a l ex p l an a t i o n o ft h e d e t e r m i n an t s o f p r iv a t e i n v es t m en t i n d ev e l o p i n gco u n t r i e s , t h e r e i s s t i l l n o co n s en s u s o n t h e t h eo r e t i -c a l f r a m e w o r k t o g u i d e t h e e m p i r i c a l w o r k ( L e v i n ean d R en e l t , 1 9 9 2 ) . I n ad d i t i o n , a s G r e en an d V i l -l an u ev a (1 9 9 0 ) a r g u e , em p i r i ca l r e s ea r ch i n th e a r eao f p r i v a t e i n v e s t m e n t b e h a v i o r h a s b e e n l i m i t e dm a i n l y b e c a u s e i n f o r m a t i o n o n p r i v a t e i n v e s t m e n th as b een s ca r ce o r u n r e l i ab l e . T h u s , a ccu m u l a t i o n o fem p i r i ca l f i n d i n g s i s n eces s a r y t o r each a c r i t i c a lm a s s o n w h i c h a c o m p r e h e n s i v e t h e o ry c a n b e b a s e d .

T h i s p ap e r co n t r i b u t e s t o t h e b o d y o f l i t e r a t u r e o np r i v a te i n v e s t m e n t b y u s i n g a c o m p r e h e n s i v e a n di ' e l i ab l e d a t a s e t a t a co u n t r y l ev e l , s u p p o r t i n g an dad d i n g t o t h e r e s u lt s o f p r ev i o u s s t u d i e s t h a t u s edd a t a a t t h e f i e l d o r f a r m l ev e l . T h e p u r p o s e o f t h i sp ap e r i s t o ex p l o r e em p i r i ca l l y t h e p o s s i b l e d e t e r m i -n an t s o f p r i v a t e i n v es t m en t i n i r r i g a t i o n i n C o l o m b i a ,an d t o s u g g es t r e l a t ed p o l i cy m eas u r e s t o en h an ce i t .S e c t i o n 2 r e v i e w s p r i v a t e a n d p u b l i c i n v e s t m e n tac t i v i ti e s i n i r ri g a t i o n i n C o l o m b i a o v e r t h e l a s t t h r eed ecad es . D r aw i n g o n ex i s t i n g l i t e r a t u r e , a f r am ew o r kf o r t h e an a l y s i s i s d ev e l o p ed i n S ec t i o n 3 . T h e

v a r i ab l e s t o b e i n c l u d ed i n t h e an a l y s i s a r e d i s cu s s edan d d e f i n ed i n S ec t i o n 4 . S ec t i o n 5 p r e s en t s t h er e s u l t s , an d S ec t i o n 6 co n c l u d es t h e p ap e r an d d i s -cu s s e s p o l i cy i m p l i ca t i o n s .

2 . P u b l i c a n d p r i v a t e i n v e s t m e n t i n i r r i g a t i o n i nC o l o m b i a

A g r i cu l t u r e i s o n e o f t h e m a j o r s ec t o r s i n C o l o m -b i a ' s e c o n o m y . F o r e x a m p l e , i n 1 9 8 8 - 1 9 9 2 i t a c -c o u n t e d f o r a b o u t 2 2 % o f th e G D P ( C E G A , 1 99 3).E m p l o y m e n t i n a g r ic u l t ur e a c c o u n t e d f o r n e a r l y 2 5 %o f t he c o u n t r y ' s w o r k f o r c e (W o r l d B a n k , 1 98 9). T h eG D P o f t h e ag ri cu l t u ra l s ec t o r ( ex c l u d i n g co f f ee ) h a sr i s e n f r o m 2 0 5 4 4 x 1 0 6 peSOS in 1950 to 80 76 2 X1 0 6 pes os in 1992 (in 1975 valu es ~).

B as ed o n D N P ' s ( 1 9 9 1 ) d a t a , t h e t o t a l i r r i g a t eda r e a i n C o l o m b i a a s o f 1 9 90 w a s 6 8 1 0 0 0 h a . O f t hi sa r e a , 4 2 1 0 0 0 h a ( 6 2 % ) w e r e i r r i g a t e d b y p r o j e c t sf u n d e d b y p r i v a te i n v e s t m e n t a n d 2 6 3 0 0 0 h a ( 3 8 % )w er e i r r i g a t ed b y 2 7 p u b l i c l y f u n d ed p r o j ec t s . F ig . 1d ep i c t s t h e ch an g es o v e r t i m e o f t h e t o t a l i r r i g a t eda r e a i n C o l o m b i a a n d i t s b r e a k d o w n b y p u b l i c l y a ndp r i v a t e l y f u n d ed p r o j ec t s .

t Th e ex ch an g e ra te b e twee n th e p e so an d th e US $ in 1 9 7 5 was26.06, and in 1990 i t was 502.20.


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A. Dinar, A, Keck / Agricuhural Economics 16 (1997) 1-1 5 3

O

03O

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t -O

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30,000

20,000

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1970 1980 1990I

200OYear

Fig. 2. Public and private investment in irrigation projects in Colombia (1964-1993) .

Table 1Area under public and private irrigation by region in 1992Region Potential irrigated Public irrigated Private irrigated Total irrigated

area (ha) area (ha) area (ha) area (ha)Antioquia 328 921 0 3625 3625At l~ tico 203 080 24 618 1206 25 824Bol k ~ 329 785 9293 3915 13 025Boyac~i 436 328 11 202 1300 12 502Caldas 55 216 0 2765 2765Caqueta 150 822 0 0 0Cauca 87 924 0 34 496 34 496Cesar 860 600 0 45 860 45 860C6rdoba 224 092 52 871 3170 56 041Cundinamarca 409475 21 000 18172 39 172Guaj ira 217 830 0 15 714 202 116Huila 99 450 4 601 24 831 29 432Magdalena 467 728 47 594 8177 55 771Meta 571 700 0 56515 56515Narifio 173 029 0 40 40N. de Santander 294954 11 619 5000 16619Quindio 0 0 0 0Putumayo a na na na naRisaralda 49 680 0 0 0Santander 156 I 14 8698 7000 15 698Tolima 322 226 55 790 25 700 81 490Valle del Cauca 303635 10700 202 113 212813Total (incl. others) b 6 509 200 287 454 463 059 750 513a No data available prior to 1989.b Totals in Table 1 are slightly different than those cited in the text, because it includes some additional regions with marginal areas underirrigation. Source: HIMAT (1993c).


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4 A . D i n a r , A . K e c k / A g r i c u l t u r a l E c o n o m i c s 1 6 ( 1 9 97 ) 1 - 1 5

Fig . 1 sugges t s tha t i r r iga ted agr icu l tu re i s a re la-t i v e l y n ew p rac t i ce i n Co l o mb i a . T h e t o t a l i r r i g a t eda rea i n t h is co u n t ry w as a ro u n d 5 0 0 0 0 h a u n t il 1 9 5 0and then s ta r t ed c l imbing to i t s p resen t va lue . Unt i l1960 , p r iva te-sec to r inves tment in i r r iga t ion p ro jec t swas neg l ig ib le . From 1960 th rough 1990 , p r iva tei r r i g a t ed a r ea ex p an d ed a t an av e rag e an n u a l r a t e o f1 5 0 0 0 h a .

Publ ic and p r iva te inves tment in i r r iga t ion p ro-j ec t s i n Co l o mb i a fo r t h e p e r i o d 1 9 6 4 t o 1 9 9 3 , i ncons tan t 1990 US$ are dep ic ted in Fig . 2 . I t can beseen f rom Fig . 2 tha t be tween 1970 and 1990 , thev a l u e o f p r i v a t e i n v es t me n t d ec l i n ed , an d t h a t i n t h el a st 3 y ea r s ( 1 9 9 1 -1 9 9 3 ) i t i n c r ea s ed d r ama t i ca ll y . I tcan a l so be seen f rom Fig . 1 tha t be tw een 1975 and1 9 8 2 t h e r e w as a l mo s t n o p u b l i c i n v es t men t i n n ewi r r iga t ion p ro jec t s . Al l pub l ic inves tment a f t e r 1982was a l loca ted to rehab i l i t a t ion o f ex i s t ing i r r iga t ionsys tems . The areas under pub l ic and p r iva te i r r iga-t ion p ro jec t s , as o f 1992 , by the var ious reg ions , a rep re s en t ed i n T ab l e 1 .

3 . C o n c e p t u a l fr a m e w o r kPr iva te inves tment in i r r iga t ion can usual ly bec lass i f i ed a t the farm and a t the reg ional l eve l .

I n v es t men t a t t h e r eg i o n a l l ev e l i s ma i n l y i n w a t e rh ead w o rk s (d ams , r e s e rv o i r s ) an d m a j o r d i s t ri b u t io ns y s t ems . G i v en t h e r e l a t i v e l y ex p en s i v e i n v es t men tin th i s type o f in f ras t ruc tu re , i t i s usual ly under takenb y g o v e rn men t s , o r i n s o me ca s e s b y g ro u p s o ffarmers such as reg ional user associa t ions . I r r iga t ioni n v es t men t a t t h e f a rm l ev e l i n c l u d es i n v es t men t i nwel l s , in secondary o r t e r t i a ry canal s , and in new ori mp ro v ed i r r ig a t i o n an d d r a i n ag e t e ch n o l o g i e s .

Pu b l i c i n v es t m en t i n n o n -w a t e r i n f r a s t ru c tu r e p ro -j ec t s s u ch a s r o ad s an d e l ec t r i c p o w er , an d i n ma j o rw a t e r h ead w o rk s , i s o f t en r eq u i r ed t o t r i g g e r ad d i -t ional p r iva te inves tment in the water sec to r . Some-t i mes t h e c ro w d i n g -o u t e f f ec t a t r e l a t i v e l y h i g h l ev -e l s o f p u b l ic i n v es t m en t may r ed u ce t h e l i k e l i h o o d o fpr iva te inves tment . Pr iva te inves tment in i r r iga t ion i sa l s o a f f ec t ed b y a s e t o f e co n o mi c , s o c i a l , an denvi ronmenta l var iab les , s imi lar to those af fec t ingi n v es t men t d ec i s i o n s i n o t h e r s ec t o r s .T h e an a l y s i s i n t h i s p ap e r d r aw s o n emp i r i ca lf ind ings in the l i t e ra tu re on p r iva te inves tment in

g en e ra l , an d o n p r i v a t e i n v es t men t an d ad o p t i o n o fi r r iga t ion t echnolog ies in par t i cu lar tha t a re rev iewedbelow in Sect ion 3 .1 .3.1. Previous relevant studies and hypotheses

Sev e ra l s t u d i e s h av e a t t emp t ed t o ex p l a i n p r i v a t ei n v es t men t l ev e l s ( i n c l u d i n g i n v es t men t i n ag r i cu l -t u r e ) i n d ev e l o p ed an d d ev e l o p i n g co u n t r i e s , a s a f -fec ted by severa l var iab les . These var iab les inc ludema c ro eco n o m i c p o l ic i e s , p u b l i c i n v es t men t , en v i ro n -men t a l an d ag ro c l i ma t i c co n d i t i o n s , h u man cap i t a l ,and po l i t i ca l ins tab i l i ty (Tun Wai and Wong, 1982;W heeler , 1984; Ch er i f and Montes , 1986; So l im ano ,1989; Musalem , 1989; Gre en and Vi l l anueva , 1990;Barro , 1991; Lev ine and Renel t , 1992 ; Binsw ange ret al . , 1993; Ca rdo so, 1993; Blea ney , 1994).T h e co n c l u s i o n s o f t h e s e s t u d i es t h a t a re r e l ev an tto the analys i s in th i s paper sugges t tha t t rade andc red i t p o l i c ie s p ro v i d ed ro b u s t ex p l an a t i o n fo r l ev e l sof p r iva te inves tment and g rowth . Po l i t i ca l ins tab i l i ty(meas u red e i t h e r d i r ec t l y o r t h ro u g h p ro x i e s ) w asfo u n d t o b e i n v e r s e l y r e l a t ed t o i n v es t men t an dgrowth , a l though wi thou t p rov id ing robus t resu l t s . Inadd i t ion , i t was found tha t appropr ia te agrocl imat icco n d i t i o n s en h an ce p r i v a t e i n v es t men t i n ag r i cu l tu r e .

The re la t ionsh ips be tween pub l ic and p r iva te in -v es t men t w e re n o t a l w ay s ro b u s t . Po s s i b l e r ea s o n sinc lude the crowding-ou t e f fec t , and the fac t tha tpub l ic inves tment in agr icu l tu re , d r iven a l so by po l i t -i ca l in teres t, i s no t a lw ays in loca t ions wi th appropr i -a te agrocl imat ic cond i t ions .

T h e l i t e r a t u r e o n i r r i g a t i o n t e ch n o l o g y ad o p t i o n(deal ing wi th p r iva te dec i s ion makers ) suppor t s thef i n d i n g s o f t he ab o v e men t i o n ed s t u d ie s . A s y n t h es iso f t h e co n c l u s i o n s o f t h e r e l ev an t s t u d i e s o n ad o p t i o nin Feder e t a l . (1985) , Negr i and Brooks (1990) ,Cas w e l l ( 1 9 9 1 ) , D i n a r an d Z i l b e rman (1 9 9 1 ) , D i n a re t a l . (1992) , and Feder and Umal i (1993) sugges t ss i mi l a r e f f ec t s o n ad o p t i o n f ro m c r ed i t an d t r ad ep o l i c ie s , an d f ro m ag ro c l i ma t i c co n d i t io n s .

Po l i t i ca l ins tab i l i ty , which has been used in someof the p rev ious s tud ies , does no t cap ture the ef fec t so f d o mes t i c v i o l en ce . Sev e ra l s t u d i e s ex i s t t h a t a c -co u n t f o r t h e e f f ec t s o f d o mes t i c v i o l en ce o n eco -n o mi c ac t i v it y , in v es t men t , an d g ro w t h . Sh am i (1 9 9 0 )d es c r i b e s s h o r t- an d l o n g - t e rm e f f ec t s o f v i o l en ce o nt h e eco n o my i n Pak i s tan . S h o r t - t e rm i mp ac t s i n c l u d e


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A. Dinar. A. Keck /Agr icu ltur al Economic s 16 (1997) I - 15 5

l o s s o f w o r k i n g d a y s t h a t l e a d t o r e d u c t i o n s i np r o d u c t i o n a n d i n t a x r e v e n u e s . L o n g - t e r m i m p a c t si n c l u de s t a g n a t i o n o f p r i v a t e l o c a l a n d f o r e i g n i n -v e s t m e n t ( d e s p it e g o v e r n m e n t a s s u r a n c e s ), s h i ft i ngo f t h e s k i l l e d l a b o r f o r c e t o s a f e r r e g i o n s , a n d c a p i t a lf l i g h t f r o m t h e c o u n t r y .M o r r i s o n ( 1 9 9 3 ) c l a i m s t h a t t h e r e i s s t r o n g r e a s o nt o b e l i e v e t h a t n o n e c o n o m i c s o c i a l v a r i a b l e s s u c h a sv i o l e n c e p l a y a k e y r o l e i n m a n y d e c i s i o n s , i n c l u d i n gi n v e s t m e n t d e c i s i o n s , a n d t h a t " t h i s i s a l m o s t c e r -t a i n l y t h e c a s e i n G u a t e m a l a , E 1 Sa l v a d o r . .. C o l o m -b i a ... a n d P e r u " . V i o l e n c e w a s m e a s u r e d a s t hen u m b e r o f r e p o r t e d h o m i c i d e c a s e s i n th e c o u n t r y .

T w o s t u d i e s e x i s t t h a t a d d r e s s v i o l e n c e i n Co l o m -b i a . M e d i n a ( 1 9 8 9 ) d e s c r i b e s t h e h i s t o r y o f v i o l e n c ei n Co l o m b i a i n t w o c r i t i c a l p e r i o d s d u r i n g t h e 1 9 4 0 sa n d t h e 1 9 8 0 s, a n d t h e n e g a t i v e e f f e c t s o f v i o l e n c e i nu r b a n a n d r u r a l a r e a s o n t h e e c o n o m i c s i t u a t i o n i nt h e c o u n t r y . J a r a m i l l o a n d J u n g u i t o Bo n n e t ( 1 9 9 3 )u s e d a m e a s u r e f o r v i o l e n c e i n a n e c o n o m e t r i c s t u d y: l i m e d a t d e t e r m i n i n g w h e t h e r o r n o t t h e n e w t r a d ep o l i c y ( A p e r t u r a ) o f 1 9 9 0 c a u s e d t h e a g r i c u l t u r a lc r i s i s i n Co l o m b i a . V i o l e n c e e x p l a i n e d p a r t o f t h ec h a n g e s i n a g r i c u l t u r a l p r o d u c t i o n o v e r t h e p e r i o d1 9 6 8 - 1 9 8 7 .3.2. The empirical models

Ba s e d o n t h e r e v i e w e d w o r k , i t i s a s s u m e d h e r et h a t t h r e e s e t s o f v a r i a b l e s a f f e c t t h e l e v e l o f p r i v a t ei n v e s t m e n t i n i r r i g a t i o n a n d d r a i n a g e . O n e s e t o fv a r i a b l e s , i n c l u d i n g e n v i r o n m e n t a l v a r i a b l e s s u c h a sw e a t h e r , c l i m a t e , a n d s o i l t y p e , m a y e x p l a i n d i f f e r -e n c e s i n i n v e s t m e n t l e v e l s o v e r t i m e a n d a c r o s sr e g i o n s . W h i l e w e a t h e r v a r i a b l e s m e a s u r e s e a s o n a l( d a i l y , m o n t h l y , y e a r l y ) c h a n g e s , c l i m a t e v a r i a b l e sr e p r e s e n t t h e l o n g - t e r m w e a t h e r c o n d i t i o n s i n a p a r -t icu la r r eg ion . The re fore , i t i s l ike ly tha t bo th c l ima tea n d w e a t h e r c o n d i t i o n s w i l l a f f e c t i r r i g a t i o n i n v e s t -m e n t d e c i s i o n s . A n o t h e r s e t o f v a r i a b l e s , i n c l u d in gm a c r o e c o n o m i c p o l i c y v a r i a b l e s s u c h a s c r o p p r i c e st w h i c h a f f e c t a g r ic u l t u r a l p r o f i t a b i l it y ) o r i m p r o v e dc r e d i t c o n d i t i o n s f o r i r r i g a t i o n l o a n s ( w h i c h m a k ei n v e s t m e n t i n i r r i g a t i o n m o r e a t t r a c t i v e ) , m a y a f f e c tt h e p r o p e n s i t y o f e n t r e p r e n e u r s t o i n v e s t i n i r r ig a t i o npro jec ts .

Ba s e d o n t h e s t u d i e s r e v i e w e d e a r l i e r , i n v e s t o r sa r e m o r e l i k e l y t o i n v e s t i n p r o j e c t s a s s o c i a t e d w i t h

a g r i c u l t u r a l t e c h n o l o g i e s a s t h e p r o f i t m a r g i n i nf a r m i n g g r o w s w i d e r , a n d w h e n t h e i n v e s t m e n t i sl e s s r i s k y , a s s u m i n g t h a t t h e i n v e s t m e n t e i t h e r s a v e sw a t e r a n d o t h e r i n p u t s o r i n c r e a s e s y i e l d . I n t h e c a s eo f i r r i g a t i o n i n Co l o m b i a , t h e p r o f i t m a r g i n f o r a g r i -c u l t u r a l p r o d u c t s t h a t a r e e i t h e r e x p o r t e d , o r f o rw h i c h i m p o r t s u b s t i t u t e s c a n b e f o u n d , h a s b e e nd e t e r m i n e d u n t il r e c e n t ly b y a m a c r o e c o n o m i c p o l ic yo f p r ic e p r o t e c ti o n . T h e o p e n i n g o f t h e e c o n o m y(Aper tu ra ) , inc lud ing the agr icu l tu ra l sec to r , in 1990t o i n t e r n a t i o n a l c o m p e t i t i o n h a d n e g a t i v e l y a f f e c t e dt h e p r o f i t a b i l i t y o f s e v e r a l a g r i c u l t u r a l c r o p s ( J a r a -m i l l o a n d J u n g u i t o Bo n n e t , 1 9 9 3 ) , a n d , t h e r e f o r e ,m a y h a v e h a d a d i r e c t e f f e c t o n p r i v a t e i n v e s t m e n t i ni r r iga t ion .

G o v e r n m e n t l e n d i n g p o l i c i e s m a y p o s i t i v e l y a f -f e c t i n v e s t m e n t b y p r o v i d i n g a t t r a c t i v e c r e d i t l i n e sf o r i n v e s t o r s a n d b y a d j u s t i n g t h e m f o r s p e c i f i c t y p e so f i r r i g a t i o n p r o j e c t s . A n o t h e r m a c r o e c o n o m i c i n t e r -v e n t i o n , p u b l i c i n v e s t m e n t i n i r r i g a t i o n i n f r a s t r u c t u r es u c h a s h e a d w o r k s a n d m a i n c o n v e y a n c e s y s t e m s , i se x p e c t e d t o h a v e p o s i t i v e e f f e c t s o n p r i v a t e i n v e s t -m e n t , k e e p i n g i n m i n d t h e c r o w d i n g - o u t e f f e c t . Pu b -l i c i n v e s t m e n t i n i n f r a s t r u c t u r e s u c h a s r o a d s , e n e r g yf a c i l it i e s e tc . , m a y e x p l a i n a g o o d d e a l o f t h e p r i v a t ei n v e s t m e n t w h e n t h e e n t i r e e c o n o m y i s c o n s i d e r e d .I n t h e c a s e o f i r r i g a t i o n i n Co l o m b i a , w h e n t h ea n a l y s i s i s a c r o s s -s e c t i o n , s o m e o f t h e p u b l i c i n v e s t -m e n t i n i n f r a s t r u c t u r e ( i n w a t e r a n d o t h e r s e c t o r s ) i no n e r e g i o n m a y n o t b e r e l e v a n t t o p r i v a t e i n v e s t m e n td e c i s i o n s i n i r r i g a t i o n i n a n o t h e r r e g i o n . W e d i d n o th a v e d a t a o n p u b l i c i n v e s t m e n t t h a t c o u l d b e u s e d t ot e s t t h i s h y p o t h e s i s . O u r p u b l i c i n v e s t m e n t d a t a i sa g g r e g a t e d a t t h e n a t i o n a l l e v e l . W e , t h e r e f o r e , e s t i -m a t e t h e e f f e c t o f p u b l i c i n v e s t m e n t o n p r i v a t e i n -v e s t m e n t i n i r r i g a t i o n u s i n g n a t i o n a l - l e v e l d a t a o n l y .

F i n a l l y , a v a r i a b l e m e a s u r i n g v i o l e n c e i s i n t r o -d u c e d . Fa r m e r s , w h o a r e r i s k a v e r s e , m i g h t b e l e s sl i k e l y to i n v e s t i n e x p e n s i v e i r r i g a t i o n e q u i p m e n t i f itm i g h t b e s u b j e c t t o v a n d a l i s m , o r i f l o c a l f a r m o u t p u tm i g h t n o t r e a c h t h e m a r k e t b e c a u s e o f v i o l e n t a t t a c k so n r o a d s . T h e v i o l e n c e e f f e c t c a n b e i n t e r p r e te d a s at h r e a t t o p r i v a t e p r o p e r t y a n d c a p i t a l . A h i g h e r l e v e lo f v i o l e n c e m a y , t h e r e f o r e , n e g a t i v e l y a f f e c t p r i v a t ei n v e s t m e n t i n i r r i g a t i o n .

P r i v a t e i n v e s t m e n t i n i r r i g a t i o n (I p and I p . de-p e n d i n g w h e t h e r i t i s a r e g i o n a l a n a l y s i s o r a n a -t i o n a l a n a l y s i s , r e s p e c t i v e l y ) w i l l b e e x p l a i n e d b y t h e


6/15

6 A . D i n a r , A . K e c k / A g r i c u l t u r a l E c om ~ m i cs 1 6 ( 1 9 9 7 ) 1 - 1 5

t h r ee g ro u p s o f v a r i ab l e s : en v i ro n m en t a l co n d i t i o n s ,v i o l e n c e , a n d g o v e r n m e n t m a c r o e c o n o m i c p o l i c y .E n v i ro n m en t a l co n d i t i o n s (E ) a r e r ep res en t ed b yseveral var iab les . The f i rs t var iab le i s an aggregatedcl imate var iab le ( C L) that i s f ix ed a t the reg ionall ev e l . T h e ag g reg a t ed c l i m a t e v a r i ab l e i s co m p r i s edof several c l imate ind icators (annual ra infa l l , ra infa l ld ay s , h u m i d i t y , an d t em p e ra t u re ) . T h e e f f ec t o f C Lo n p r i v a t e i n v es t m en t i s n o t k n o wn a p r i o r i ; wh i l eincreases in annual ra infa l l , ra infa l l days , and humid-i t y a r e ex p ec t ed t o n eg a t i v e l y a f f ec t p r i v a t e i n v es t -m en t i n i r r i g a t i o n , h i g h e r v a l u es o f t em p era t u re a r el ikely to pos i t ively af fect i r r igat ion inves tment . Theu l t im a t e e f f ec t o f t h is v a r i ab l e d ep en d s o n t h e i n t e r-ac t i on s am o n g t h e fo u r c l im a t e i n d ica t o rs . A w ea t h e rvar iab le of to ta l annual ra infa l l (R) , which var iesac ro s s r eg i o n s an d o v e r t i m e , i s ex p ec t ed t o n eg a -t i v e l y a f f ec t p ri v a t e i n v es t m e n t s i n ce h i g h e r am o u n t so f r a i n fal l r ed u ce t h e n eed fo r i r r ig a t io n . T h e s eco n dv ar i ab l e wh i ch ex p res s es v i o l en ce (v ) , i s ex p ec t ed t on eg a t i v e l y a f f ec t p r i v a t e i n v es t m en t . T h e l a s t g ro u po f v a r i ab l e s fo r ex p l a i n i n g p r i v a t e i n v es t m en t i s g o v -e rn m en t m acro eco n o m i c p o l i cy i n t e rv en t i o n , wh i chis represented by the fo l lowing var iab les : (1) anag g reg a t ed ag r i cu lt u ra l c ro p p ri ce (p o r P , fo r r e -g ional and nat ional analyses , respect ively) ; (2 ) a realin teres t ra te for inves tment pro ject s in i r r igat ion anddrainage (q~) ; and (3) a dum my var iab le d i s t inguish-i n g b e t ween p e r i o d s w i t h d i f f e r en t c r ed i t co n d i t i o n sfo r ag r i cu l t u ra l an d i r r i g a t i o n p ro j ec t s (D) . H i g h e rc ro p p r i ces , l o wer r ea l i n t e r e s t r a t e s , an d i m p ro v edc red i t co n d i t i o n s a r e each ex p ec t ed t o p o s i t i v e l ya f f ec t p r i v a t e i n v es t m en t .

T wo v e r s i o n s o f t h e c ro s s - s ec t i o n m o d e l werees t i m a t ed . T h e f i r s t v e r s i o n a s s u m es t h a t i n v es t m en td ec i s i o n s i n Year t d ep en d o n i n fo rm a t i o n av a i l ab l ed u r i n g t h e s am e y ea r . T h e s eco n d v e r s i o n a s s u m esthat ef fe ct s are l agged; that i s , deci s ions in Ye ar ta r e b as ed o n i n fo rm a t i o n f ro m Year t - 1.

T h e c ro s s - s ec t i o n m o d e l s t o b e e s t i m a t ed a re :I ~ = g ( E , v , p , D , ~ ) ( 1 )T h e c ro s s s ec t i o n t i m e- s e r i e s l ag g ed m o d e l s a r e

I F = h ( E , _ , , V l_ , , p t _ , , D , q ~ t _ , ) (2)A m o d e l b as ed o n t i m e- s e r ie s d a t a a t th e n a t i o n a l

l ev e l was a l s o e s t i m a t ed . T h i s m o d e l a t t em p t s t ov e r i fy t h e h y p o t h es i s t h a t p u b l i c i n v es t m en t b o o s t s

p r i v a t e i n v es t m en t i n t h e s ec t o r . T h e m o d e l a s s u m esthat p r ivate inves tment in i r r igat ion a t the nat ionall ev e l ( I f ) i s af fected by publ ic inve s tmen t in i r r iga-t ion ( I F_ l ) , v io lenc e (V,_ i) , c ro p pr ices (P ,_ l ) , andc red i t co n d i t i o n s (D) .1 7 = e ( l L , ,V , _ , , P , _ I , D ) ( 3 )wh ere V = Eregio ,sV, and P i s a weighted a verage o ft h e r eg i o n a l c ro p p r i ces p .

The empi r ical re la t ionsh ips to be es t imated as -s u m e p ro f i t -m ax i m i z i n g p r i v a te i n v es t o r s . T h e re fo re ,b as ed o n t h e co n cep t u a l f r am ewo rk d es c r i b ed ab o v e ,p r i v a t e i n v es t m en t d ec i s i o n s w i l l r e s p o n d t o p o l i cyan d s t a t e v a r i ab l e s i n t h e m an n er s h o wn b e l o w . Inthese relat ionships, I .~ or I .~ represents the fi rs t -orderd e r i v a t i v es o f 1 I' or, I e an d 1.~',.o r I ~ , ( t ime index i si g n o red fo r s i m p l i c i t y ) s t an d s fo r t h e s eco n d o rd e rd e r i v a t i v es o f I e or I p w i th respect to the re leva ntco m p o n en t s o f X( X = C L, R , I e , p , p , ~ , v, V ) .IE , ?0 l,c , . c , ? 0 I]~' < 0 I]~'R < 0I ; >_ o I/,',, _ 0 I P o < O I ~ ' < 0 l ~t% < Olo


7/15

A . D i n a r , A . K e c k / A g r i c u l t u r a l E c o n o m i c s 1 6 ( 1 9 9 7 ) 1 . - 1 5 7

i n s e l ec t ed r eg i o n s t h a t a r e ch a rac t e r i zed b y h i g hv i o l en ce co u l d b e p ro v i d ed , i g n o r i n g t h e ad d i t i o n a lins t i tu t ional cos t s associa ted wi th th i s in terven t ion .T h i s p r emi u m can b e i n t h e fo rm o f i mp ro v ed c r ed i tco n d i t i o n s ( e . g . ex t en d ed r ep ay men t an d g r ace p e r i -ods tha t resu l t in lower rea l in teres t ra tes ) . The ra teof subs t i tu t ion be tween the rea l in teres t ra te andv i o l en ce , a s an ex amp l e , i s p ro v i d ed b yd ~ 0 1 I' O v fo r 1 I ' = 117 ( 6 )d v O ~ O I I '

A s imi lar subs t i tu t ion cou ld be cons idered be-tween c l imate and in teres t ra te to re f l ec t suppor t fo rr eg i o n s w i t h u n fav o rab l e c l i ma t e co n d i t i o n s. G o v e rn -ment ass i s t ance , v ia spec ia l c red i t cond i t ions , fo rpr iva te inves tment in i r r iga t ion p ro jec t s i s p rac t i cedi n I s r ae l (D i n a r an d Y aro n , 1 9 9 2 ) . G o v e rn men t p o l -i cy there i s in tended to suppor t fa rmers l iv ing inb o rd e r r eg i o n s , w h e re t h ey ex p e r i en ce h o s t i l i t y r i s k ,b y p ro v i d i n g t h em w i t h s p ec i a l c r ed i t co n d i t i o n s fo ri n v es t men t i n i mp ro v ed i r r i g a t i o n t e ch n o l o g i e s ( a swel l as o ther agr icu l tu ra l p ro jec t s ) .

4 . D a t a a n d e m p i r i c a l s p e c i f i c a t i o n sT h e an a l y s i s u s e s p o o l ed c ro s s - s ec t i o n an d t i me-s e r i e s d a t a co mb i n ed w i t h f i x ed r eg i o n a l e f f ec t s . I n

prepar ing the da ta fo r the analys i s , severa l sourcesh av e b een av a i l ab l e . T h es e s o u rce s p ro v i d ed i n fo r -ma t i o n o n t h e ma j o r ag r i cu l t u r a l p ro d u c t i o n r eg i o n si n Co l o mb i a o v e r t h e l a s t t h r ee d ecad es . T h e ma i nin format ion sources are l i s t ed be low, inc lud ing they ea r s f o r w h i ch d a t a w as av a i l ab l e .

T w en t y o n e r eg i o n s ( ac t u a l l y , 2 2 r eg i o n s ex i s t ,b u t Pu t u m ay o r eg i o n w as c r ea t ed i n 1 9 8 9 , an d th e r e -fo re , no t inc luded in the analys i s ) were inc luded inthe analys i s ( see Tab le 1 ) . Product ion da ta in DNP(1993a,b ) tha t inc lude cu l t iva ted area and p roduct ionfo r a l l c ro p s g ro w n i n each r eg i o n fo r t h e p e r i o d1 9 8 1 -1 9 9 2 , a r e u s ed i n t h e an a l y s i s . Ma j o r c ro p su n d e r i r r i g a t i o n t h a t t o g e t h e r cap t u r e 6 0 -1 0 0 % o fthe harves ted l and inc lude beans , maize , car l a panela ,p lan ta in , co t ton , so rghum, cassava , bar ley , po ta to ,wheat , soybeans , sugarcane , r i ce , pa lm o i l , and ba-n an a , T h ree t o f i v e ma j o r i r r i g a ted c ro p s , a cco u n t i n gfo r 6 0 -7 0 % o f t h e r ep o r t ed cu l t i v a t ed a r ea i n eachreg ion , were se lec ted .

Pr iva te inves tment in i r r iga t ion p ro jec t s i s def inedi n t h i s p ap e r a s t h e s u m o f l o an s p ro v i d ed b y t h ep u b l i c ag en c i e s FFA P an d F IN A G RO t o p r i v a t e - s ec -to r inves to rs ( fa rmers , fa rm corpora t ions ) fo r i r r iga-t ion and d ra inage p ro jec t s and fo r wel l s . Data onpr iva te inves tment ( in cur ren t pesos ) in i r r iga t ion anddra inage p ro jec t s and in wel l s , a t the reg ional l eve lf o r t he p e r io d 1 9 7 4 - 1 9 8 9 w e r e t a k e n fr o m B a n c o d el a Rep u b l i ca (v a r i o u s y ea r s ) . D a t a fo r t h e p e r i o d1 9 9 0 -1 9 9 3 ( i n cu r r en t p e s o s ) w as p ro v i d ed d i r ec t l yb y F I N A G R O ( F I N A G R O , 1 99 4). F I N A G R O l o a n sa r e a s s u med t o r ep re s en t 6 0 -7 0 % o f t h e l o an s av a i l -ab le to the p r iva te sec to r fo r inves tment in i r r iga t ionand dra inage p ro jec t s (Ramirez , 1993) , and wi l ltheref ore be used as an es t imate o f p r iva te i r r iga t ioni n v es t men t f o r th e p e r i o d 1 9 9 0 -1 9 9 3 . T h e d a t a w e reco n v e r t ed t o co n s t an t 1 9 9 0 U S$ an d ca t eg o r i zed b yreg ion and year . To avo id sca le b ias , the analys i smeas u re s p r i v a te i n v es t men t a s t h e v a l u e o f r eg i o n a li n v es t men t p e r h ec t a r e o f p o t en t i a l i r r i g a t ed l an d(Table 1 ) .

C l i ma t e d a t a f o r t h e r eg i o n s an a l y zed w ere fo u n di n H IMA T (1 9 9 3 b ) . W ea t h e r d a t a f o r t h e i n d i ca t edr e g i o n s w e r e p r o v i d e d b y H I M A T ( 1 9 9 4 ) f o r t h ep e r i o d 1 9 7 4 -1 9 9 3 . Sev e ra l c l i ma t e an d w ea t h e r v a r i -ab les were avai l ab le fo r the analys i s a t the reg ionall evel . These var iab les inc lude ra in fa l l (measured inmi l l i me t r e s p e r mo n t h ) , r a i n f a l l d ay s (p e r mo n t h ) ,t emp e ra t u r e (mo n t h l y av e rag e cen t i g r ad es ) , an d h u -mi d i t y (mo n t h l y av e rag e p e r cen t ) . T o cap t u r e t h eovera l l c l imat ic e f fec t o f these var iab les , and top rev en t mu l t i co l i n ea r i t y b e t w een s o me v a r i ab l e s(such as humid i ty and p rec ip i t a t ion) , a p r inc ipa lco mp o n en t an a l y s i s (PCA ) o f t h e fo u r v a r i ab l e s w asp e r fo rmed t o g en e ra t e a s i n g l e c l i ma t e v a r i ab l e ,which was subsequen t ly used in the cor re la t ion anal -y s i s. T h e w ea t h e r d a t a s p an s t h e p e r i o d 1 9 7 4 th ro u g h1993 and cons i s t s o f da ta po in t s fo r the same fourc l imate var iab les ( t empera tu re , humid i ty , ra in fa l l , andra in fa l l days ) . Al though mul t ip le weather s t a t ionsex i s t i n s o me r eg i o n s , t o ma i n t a i n co n s i s t en cy , o n l yone weather -s ta t ion f igure per reg ion was used in theanalys i s . I t was assumed tha t th i s s t a t ion (as repor tedi n H IMA T , 1 9 9 3 b ) r ep re s en t s t h e r eg i o n .V i o l en ce i s r ep o r t ed o n a c ro s s - s ec t i o n an d at ime-ser ies bas i s . The da ta a re used to sca le v io lenceb y t h e n u mb er o f i n h ab i t an t s i n each r eg i o n . Re -g i o n a l p o p u l a t i o n f i g u re s w e re e s t i ma t ed u s i n g d a t a


8/15

8 A . D i n a r , A . K e c k / A g r i c u l t u r a l E c o n o m i c s 1 6 ( 1 9 9 7) 1 - 1 5

f ro m t h e 1 9 7 3 , 1 9 8 5 , an d 1 9 9 3 cen s u s e s (D A N E ,1985 , 1989 , 1993) . Reg ional da ta on homicides andas s a s si n a ti o n s a r e t ak en f ro m L o s ad a L o ra (1 9 9 1 ) fo r1 9 7 5 - 1 9 8 8 a n d f r o m R e v i s t a C r i m i n a l i d a d f o r1 9 8 9 -1 9 9 2 . T h e d a t a d o n o t a l l o w fo r d i s ag g reg a -t ion o f ru ra l and u rban v io lence , so it is as sume d tha tt h e r e i s a c ro s s o v e r e f f ec t o f u rb an v i o l en ce o n ru r a li n v es t men t ch o i ce s .

Reg i o n a l p o p u l a t i o n g ro w t h e s t i ma t e s w e re o b -t a in ed b y f i tt i n g a s em i l o g g ro w t h c u rv e t o av a i l ab l edata po in t s in 1973 , 1985 , and 1993 , fo r each reg ion ,i n o rd e r t o ca l cu l a t e p o p u l a t i o n f i g u re s f o r y ea r s f o rw h i ch cen s u s d a t a w as n o t av a i l ab l e . G ro w t h cu rv esfor the 21 reg ions (no t p resen ted) sugges t annualg ro w t h r a t e s r an g i n g b e t w een 0 . 8 3 % i n Q u i n d i o t o4 . 0 7 % i n Me t a . R- s q u a re v a l u es w e re 0 . 9 0 4 an dab o v e . A l t h o u g h cen s u s d a t a ex i s t f o r p r ev i o u s y ea r s ,t h ey w ere n o t u s ed s i n ce s o me r eg i o n a l b o u n d a r i e sw ere ch an g ed i n th e p e r i o d p r i o r t o 1 9 7 3 , w h i ch d o e sn o t a l l o w a b a s i s f o r co mp ar i s o n .

A n n u a l r eg i o n a l v i o l en ce w as ca l cu l a t ed a s t h es u m o f a l l h o m i c i d e an d a s s a s si n a ti o n ca s e s i n t h ep o l i ce h o mi c i d e s t a t i s t i c s f o r t h e p e r i o d 1 9 7 5 -1 9 9 2 .In o rd e r t o acco u n t f o r d i f f e r en t p o p u l a t i o n s ca l e stha t a f fec t v io lence in the d i f feren t reg ions , a v io -lence f igure per 100000 inhab i tan t s i s used in theanalys i s .

Pub l ic inves tment in i r r iga t ion p ro jec t s , and main-t en an ce o f ex i s t i n g p ro j ec t s, i n Co l o m b i a i s r ep o r t edi n D N P (1 9 9 1 ) . Pu b l i c i n v es t men t i n mo n e t a ry v a l -ues i s repor ted a t the na t ional l eve l on ly . T he da ta , inco n s t an t 1 9 9 0 p es o s , h av e b een c o n v e r t ed t o co n s t an t1 9 9 0 U S$ , b a s ed o n t h e i n f la t i o n - an d ex ch an g e - r a t ef i g u re s i n D N P (1 9 9 3 c ) . E x ch an g e r a t e s b e t w een t h eCo l o mb i an p es o an d t h e U S$ , an d i n f l a t i o n r a t e s f o rt h e p e r i o d 1 9 7 0 -1 9 9 3 , a r e p ro v i d ed i n D N P (1 9 9 3 c ) .Cro p p r i ce s p a i d t o p ro d u ce r s w e re u s ed i n t h ean a l y s i s . D o mes t i c p r i ce d a t a a r e t ak en f ro m Co l o m-bian Depar tment o f Agr icu l tu re s t a t i s t i cs , and in ter -na t ional p r i ces a re f rom IMF s ta t i s t i cs , as p rov idedi n D N P (1 9 9 3 c ) . T h e p r i ce s a r e l a rg e l y p ro d u ce rpr ices , wi th the excep t ion o f car l a panela , p lan ta in ,p o t a t o , an d y u cca , f o r w h i ch o n l y co n s u mer p r i ce swere avai l ab le .T h e ag g reg a t ed c ro p p r i ce i s c a l cu l a t ed u s i n gd i f f e r en t v a r i ab l e s . Cro p -p r i ce d a t a f o r t h e p e r i o d1 9 7 0 - 1 9 9 3 a r e p ro v i d e d b y D N P ( 1 9 9 3 a ,b , c ) a n d b yV a l d r s an d Sch e f f e r ( 1 9 9 3 ) . T h e d a t a i n c l u d e d o m es -

t i c p r i ces ( in pesos ) fo r a l l c rops inc luded in theanalys i s , and in terna t ional p r i ces ( in US$) fo r as u b g ro u p o f c ro p s t h a t h av e b een a f f ec t ed b y t h eg o v e rn men t ' s 1 9 9 0 t r ad e - l i b e r a l i z a t i o n p o l i cy . Y i e l dd a t a an d cu l t i v a t ed a r ea , b y c ro p , a r e p ro v i d ed fo rt h e p e r i o d 1 9 8 0 -1 9 9 1 i n D N P (1 9 9 3 b ) .T h e c ro p p r i ce s r ep re s en t , f o r s o me c ro p s ,t h ro u g h o u t p a r t o f t h e p e r i o d (1 9 8 1 -1 9 8 9 ) t h e g o v -e rn men t a l ' p r i c e p ro t ec t i o n p o l i cy . ' T h i s p o l i cy s e tt a r i f f an d n o n - t a r i f f p ro t ec t i o n ag a i n s t i m p o r t ed c ro p s ,and p r ice s t ab i l i za t ion and d i scr iminated exchangera tes fo r expor ted crops . S ince 1990 , a t rade- l ibera l i -za t ion po l i cy tha t in t roduced in terna t ional p r i ces in tot h e l o ca l p r i ce s y s t em (A p e r t u r a ) h a s b een i n e f f ec t .

I n o rd e r t o cap t u r e t h e p r i ce e f f ec t , an ag g reg a t edp r i ce v a r i ab l e w as ca l cu l a t ed fo r e ach r eg i o n (p ) ,an d a l s o a t t h e n a ti o n a l lev e l (P ) . T h e v a r i ab l e p i sa c ross -sec t ion and t ime-ser ies var iab le , s ince eachreg i o n i s ch a rac t e r i zed b y a d i f f e r en t s e t o f ma j o rc ro p s , an d a s s u mi n g (b a s ed o n o b s e rv a t i o n s ) t h a tt h e s e c ro p s d o n o t v a ry o v e r t h e t i me s p an o f t h eanalys i s , excep t in the i r shares . These crops togetheracco u n t f o r 6 0 -7 0 % o f t h e cu l t i v a t ed a r ea s . A l lo t h e r c ro p s , i n d i v i d u a l l y acco u n t i n g fo r marg i n a la r ea s , an d a l s o n o t c ro p p ed ev e ry y ea r , w e re n o tinc luded in the analys i s , as suming tha t they havemarg i n a l e f f ec t s o n f a rmer s ' i n v es t men t d ec i s io n s . APCA w as ap p l i ed t o each r eg i o n an d an ag g reg a t edp r i ce (p ) c a l cu l a t ed fo r e ach r eg i o n i n ev e ry y ea r .A l l p r i ce v a l u es a r e ex p re s s ed i n co n s t an t 1 9 9 0 U S$ .

A r eg i o n a l r ev en u e v a r i ab l e w as a l s o ca l cu l a t edb y mu l t i p l y i n g t h e cu l t i v a t ed a r ea b y t h e y i e l d an dt h e c ro p -y i e l d p r i ce , an d b y ag g reg a t i n g o v e r t h ev a r i o u s c ro p s i n t h e r eg i o n . T h i s v a r i ab l e r ep l ace sthe p r ice var iab le in some of the es t imates . Al lr ev en u e v a l u es a r e ex p re s s ed i n 1 9 9 0 U S$ .Cred i t d a t a f o r p r i v a t e i n v es t me n t i n i r r i g a ti o n an ddra inage p ro jec t s , and fo r d r i l l ing wel l s , were p ro-v i d ed b y V aca (1 9 9 4 ) . T h e d a t a i n c l u d e n o mi n a li n t e r e s t r a t e s an d g r ace p e r i o d s fo r d i f f e r en t l o anp ro g ram s fo r t h e p e r i o d 1 9 7 4 -1 9 9 3 . N o m i n a l in t e r-e s t - r a t e d a t a w e re t ak en f ro m g o v e rn men t s o u rce s( F F A P a n d F I N A G R O ) , a n d f r o m V a c a ( 1 9 9 4 ) .W h ere mo re t h an o n e r a t e w as i d en t i f i ed ( e . g . as h o r t - t e rm an d a med i u m- t e rm r a t e o f i n t e r e s t ) , t h er a t e s w e re s u mmed an d an av e rag e ca l cu l a t ed . Bas edo n V aca (1 9 9 4 ) , r ep r e s en t a t i v e l o an co n d i t i o n s w e reca l cu l a ted fo r e ach y ea r . T h i s i n c l u d es n o mi n a l i n te r -


9/15

A . D i n ar , A . K e c k / A g r i c u h u r a l E c o n o m i c s 1 6 ( 1 9 9 7) 1 - 1 5 9

es t r a t e s , r ep ay m en t p e r i o d s , an d g r ace p e r i o d s , t oca l cu l a t e m o r e p r ec i s e r ea l i n t e r e s t r a t e s . U s i n g t h ean n u a l i n f l a t i o n i n f o r m a t i o n , a r ea l i n t e r e s t r a t e w asca l cu l a t ed u s i n g a n u m er i ca l s o l u t i o n t o t h e eq u a t i o n

l ) TX -( 1 + ~ ) T _ 1 i =, ~+ l4 ' ( 6 + 1) r - '~X ( 1 + 6 ) ' 1x

( 7 )In the equ at ion X i s the loan ( i t can be se t to 1 ande l i m i n a t ed f r o m t h e eq u a t i o n ) ; 4 ~ i s t h e l o an ' s n o m i -nal in ter es t r a te ; T i s the r e pa ym en t per iod ; t x i s thelas t ye ar o f the g ra ce per io d ; ~s i s the in f la t ion r a tein year i ; and ~p i s the r ea l in ter es t r a te o f tha t sam eloan . S inc e a l l var iab les ar e kno wn exc ep t ~p, i t canb e ca l cu l a t ed f r o m t h e eq u a t i o n . T h e r ea l i n t e r e s t ra t e(~p) i s a t ime- ser ies var iab le , bu t i t i s f ixed a t ther eg i o n a l l ev e l . T h e r e s u l t s ( n o t p r e s en t ed ) i n d i ca t et h a t r ea l i n t e r e s t r a t e s f o r t h e s e i n v es t m en t s h av eb een co n s i s t en t l y n eg a t i v e o v e r t h e p as t 2 0 y ea r s .

5 . R e s u l t s

c r eas i n g . Seco n d , t h e r eg i o n a l d a t a ( n o t p r e s en t ed )i n d i ca t e w i d e v a r i a t i o n i n v i o l en ce l ev e l s o v e r t i m ean d ac r o s s r eg i o n s .

T h e r eg i o n a l d a t a o n v i o l en ce ( n o t p r e s en t ed )reveal severa l in ter es t ing genera l r esu l t s . F i r s t , i t i sc l ea r t h a t v i o l en ce ( i n ab s o l u t e t e r m s ) v a r i e s s i g n i f i -can t l y ac r o s s r eg i o n s an d o v e r t i m e . T h e v a r i a t i o no v e r t i m e i s ex p l a i n ed p a r t i a l l y a s a f f ec t ed b y p o l i t i -ca l ev en t s (M ed i n a , 1 9 8 9 ). Fo r ex am p l e , i n 1 9 88t h e r e w as a s i g n i f i can t i n c r eas e i n t h e l ev e l o f v i o -l en ce i n m an y r eg i o n s . T h e v a r i a t i o n i n ab s o l u t ev a l u es o f v i o l en ce ac r o s s r eg i o n s i s p r o b ab l y a l s oa f f ec t ed b y p o p u l a t i o n i n c r eas es . R eg i o n s w i t h r e l a -t i v e l y g r ea t e r p o p u l a t i o n s a l s o h av e a h i g h e r i n c i -d en ce o f v i o l en ce

A n o t h e r o b s e r v a t i o n o b t a i n ed f r o m t h e d a t a i s t h a tin a l l r eg ions , there i s an increase in the number o fv i o l e n c e c a s e s o v e r t i m e . S o m e r e g i o n s h a v e a m o d -e r a t e i n c r eas e , w h i l e o t h e r r eg i o n s h av e a d r am a t i ci n c r eas e . Fo r ex am p l e , i n V a l l e d e l C au ca t o t a l v i o -l en ce ca s e s i n c r eas ed f r o m 5 3 4 i n 1 9 7 5 t o 3 0 2 2 i n1 9 9 2 . I n A n t i o q u i a t o t a l v i o l en ce ca s e s i n c r eas edf r o m 1 0 8 2 t o 9 1 2 7 o v e r t h e s am e p e r i o d . S i n ce 1 98 9 ,o n l y s i x r eg i o n s h av e ex p e r i en ced a d ec r eas e i n t h el e v e l o f r e c o rd e d v i o le n c e . T a b l e 2 p r e s e n t s c h a n g e sin v io lence f rom 1975 to 1992 in the r eg ions tha t a r ei n c l u d ed i n t h e an a l y s i s . R es u l t s s h o w t h a t f o r m o s tr eg i o n s , v i o l en ce h as i n c r eas ed b y s ev e r a l h u n d r edp e r cen t o v e r t h a t p e r i o d , b u t w i t h a l o w er r a t e o fi n c r eas e b e t w een 1 9 89 an d 1 9 92 .

T h e r e g io n a l p r i v a t e i n v e s t m e n t v a l u e s s u g g e s tt h a t , i n ab s o l u t e v a l u es , p r i v a t e i n v es t m en t i n i r r i g a -t i o n i s i n t en s i v e i n o n l y a f ew o f t h e 2 1 r eg i o n si n c l u d ed i n t h e an a l y s i s . Fo r ex am p l e , o n l y A n t i o -q u i a . C e s a r , C 6 r d o b a , C u n d i n a m a r c a , M a g d a l e n a ,an d V a l l e d e l C au ca each h av e t o t a l an n u a l i n v es t -m e n t v a l u e s th a t e x c e e d U S $ 8 0 0 0 0 0 . H o w e v e r , i t i sc l ea r t h a t t h e p o t en t i a l am o u n t o f i r r i g ab l e l an da f f ec t s t h e i n v es t m en t v a l u es , a s can b e s een f r o mt h e i n d i v i d u a l p e r - h ec t a r e p r i v a t e i n v es t m en t v a l u est h a t r a n g e b e t w e e n U S $ 2 5 0 a n d U S $ 2 0 0 0 .

T h e t r en d i n v i o l en ce a t t h e n a t i o n a l l ev e l i nC o l o m b i a i s p r e s en t ed i n F i g . 3 .

Sev e r a l o b s e r v a t i o n s can b e m ad e a t t h i s p o i n t .F i r s t , ex cep t f o r t h r ee s h o r t p e r i o d s ( 1 9 7 7 - 1 9 7 8 ,1 9 8 1 - 1 9 8 3 , a n d 1 9 9 1 - 1 9 9 2 ) , t h e l e v e l o f v i o l e n c ei n C o l o m b i a ( a t th e n a t i o n a l l ev e l ) i s s t ead i l y i n -

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1 0 A . D i n a r , A . K e c k / A g r i c u l t u r a l E c o n o m i c s 1 6 ( 19 9 7 ) 1 - 1 5T a b l e 2C h a n g e i n c a s e s o f v i o l e n c e f r o m 1 9 7 5 t o 1 9 9 2 i n C o l o m b i aR e g i o n C h a n g e i n to t a l c a s e s o f v i o l e n c e ( % ) C h a n g e i n c a s e s o f v i o l e n c e p e r 1 0 0 0 0 0 i n h a b i t a n ts (%

1 9 7 5 - 1 9 9 2 1 9 8 9 - 1 9 9 2 1 9 7 5 - 1 9 9 2 1 9 8 9 - 1 9 9 2A n t i o q u i a 7 4 4 1 8 5 0 0 1 1A t l ~ n t i c o 1 7 8 3 0 6 7 1 9B o l i v f i r 3 0 7 3 7 1 9 8 3 0B o y a c ~ . 1 3 1 6 9 2 3C a l d a s 3 7 5 2 2 6 9 - 3C a q u e t a a 1 3 4 3 9 7 7 2 9C a u c a 27 6 6 9 1 8 9 6 1C e s a r 3 3 1 8 1 8 4 IC 6 r d o b a 3 1 3 - 1 5 1 8 8 - 2 0C u n d i n a m a r c a 4 1 2 3 0 1 8 3 1 7G u a j i r a 7 4 - 6 3 1 - 1 0H u i l a 3 5 4 3 0 2 0 2 2 1M a g d a l e n a 3 1 9 7 3 2 4 0 6 7M e t a 1 5 9 - l 9 3 0 - 2 8N a r i f i o 1 4 8 - 1 8 6 - 6N . d e S a n t a n d e r 2 9 5 2 8 1 81 2 1P u t u m a y o ~ n a - 1 7 n a - 2 8Q u i n d i o 4 6 7 7 5 3 9 2 7 1R i s a r a l d a 9 0 - 6 3 3 3 - 6 5S a n t a n d e r 1 7 3 7 1 1 2 3T o l i m a 1 7 1 3 1 1 2 6 2 7V a l l e d e l C a u c a 4 6 6 3 1 3 1 2 2 4a D a t a a v a i l ab l e f o r 1 9 8 1 t h r o u g h 1 9 9 2 o n l y .b N o d a t a a v a i l a b l e p r i o r t o 1 9 8 9 .

R e g r e s s i o n a n a l y s e s t h a t i n c l u d e d e a c h c l i m a t ev a r i ab l e ( t em p er a t u r e , r a i n f a l l , r a i n f a l l d ay s , an d h u -m i d i t y ) s ep a r a t e l y d i d n o t p r o v i d e g o o d r e s u l t s . T h i sm ak es s en s e s i n ce t h e c l i m a t e e f f ec t i s co m b i n ed .T h e r e f o r e , a P C A a n a l y s i s w a s p e r f o r m e d o n t h ec l i m a t e v a r i ab l e s . U s i n g P C A , t h e f i r s t e i g en v ec t o re x p l a i n in g 5 5 % o f th e s t a n d a rd i z e d v a r i a n c e a m o n gt he f o u r c l i m a t e v a r i a b le s a r e, r e s p e c t iv e l y , - 0 . 4 3 7 ,0 .4 5 3 , 0 .6 2 0 an d 0 .4 6 7 . B as ed o n t h e s e v a l u es , ag l o b a l c l i m a t e v a r i ab l e w as ca l cu l a t ed an d u s ed i nt h e co r r e l a t i o n an a l y s e s . T h e c l i m a t e v a r i ab l e , a sd e f i n ed h e r e , i s e a s y t o i n t e r p r e t . H i g h e r t em p er a t u r ev a l u es i n c r ea s e t h e l i k e l i h o o d f o r i n v es t m en t i n i r r i -g a t i o n , an d a l l o t h e r v a r i ab l e s w o r k i n t h e o t h e rd i r ec t io n . T h e r e f o r e , t h e n eg a t i v e s i g n o f t he f i r s tw e i g h t ( - 0 .4 3 7 ) co r r ec t s f o r t h e t em p er a t u r e e f f ec t ,an d t h e o v e r a l l e f f ec t o f t h e c l i m a t e v a r i ab l e d ep en d so n t h e i n t e r ac t i o n am o n g t h e f o u r v a r i ab l e s . T h eo v e r a l l e f f ec t o f t h e c l i m a t e v a r i ab l e i n t h e an a l y s i sy i e l d ed a n eg a t i v e co e f f i c i en t . T h a t i s , h i g h e r v a l u esf o r t h e c l i m a t e v a r i ab l e a r e n eg a t i v e l y co r r e l a t ed

w i t h i n v es t m en t i n i r r i g a t i o n . T h i s m ak es s en s e s i n ceh i g h e r h u m i d i t y , h i g h e r r a i n f a l l an d m o r e r a i n f a l ld ay s d ec r ea s e t h e n eed f o r i n v es t m en t i n i r r i g a t i o np r o j ec t s .

A t t h e a g g r e g a t e l e v e l , o n e c a n o b s e r v e f r o m F i g.2 t h a t , a f te r m o r e t h an a d ecad e o f co n t i n u o u s d e -c l i n e i n p r i v a t e i n v es t m en t i n i r ri g a t io n , t h e t r en d h asch an g ed , an d a s i g n i f i can t i n c r ea s e i n i n v es t m en t i sr ea l i zed b e t w e en 1 9 9 1 an d 1 9 93 ( an d a l s o i n 1 9 94 ,w h i ch i s n o t s h o w n i n F i g . 2 ) . W h a t h ap p en ed b e f o r e1 9 9 0 an d a f t e r 1 9 9 0 t h a t c an ex p l a i n t h e ch an g e i nthe t r end?

B as ed o n V aca ( 1 9 9 4 ) , t h e n ew c r ed i t p o l i cy , i ne f f ec t s t a r t in g i n 1 99 0 , i n t r o d u ced m a n y f ea t u r e s t h a ts h o u l d p r o v i d e i n cen t i v e s f o r p r i v a t e i n v es t m en t .F i r s t , there ar e more cr ed i t l ines tha t can f i t specia lco n d i t i o n s an d i n v es t m en t t y p es ( s u ch a s i r r i g a t i o neq u i p m en t , d r a i n ag e e t c . ) a s o p p o s ed t o o n e c r ed i tl i n e b e f o r e 1 9 9 0 . S eco n d , t h e r e a r e m o r e r e s o u r cesav a i l ab l e f o r l o an s , co m p ar ed t o t h e p e r i o d p r i o r t o1 9 9 0 . T h i r d , l o an s co v e r 8 0 % o f t h e i n v es t m en t ,


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A. Dinar, A. Keck / Agricultural Economics 16 (1997) 1 15 1 I

c o m p a r e d t o 5 0 - 6 0 % p r i o r t o 1 9 90 . F o u r th , g r a c ep e r i o d s a r e n eg o t i ab l e o n an i n d i v i d u a l b a s i s , co m -p a r ed t o a f i x ed g r ace p e r i o d o f 3 y ea r s p r i o r t o1990 . And f i f th , loans ar e p rocessed f as ter , in lesst h a n 6 m o n t h s n o w , c o m p a r e d t o 1 - 3 y e a r s p r i o r t o1990.F i n a l l y , a r eg r e s s i o n an a l y s i s w as co n d u c t ed ,a i m ed a t e s t i m a t i n g t h e r e l a t i v e e f f ec t o n i n v es t m en to f th e v a r i ab l e s d i s cu s s ed ea r l i e r . S i n ce o n l y 11y e a r s (1 9 8 1 - 1 9 9 2 ) o f c r o p - y ie l d a n d p r ic e d a t a a r eav a i l ab l e f o r t h e r eg i o n s u n d e r i n v es t i g a t i o n , s o m e o ft h e i n v es t m en t an d t h e v i o l en ce d a t a , ex i s t i n g f o r t h ey ea r s b ey o n d t h a t r an g e , co u l d n o t b e u s ed .

R e g i o n a l e f f e c ts h a v e b e e n i n t r o d u c e d v i a d u m m yv ar i ab l e s . T h es e a r e s p ec i a l r eg i o n a l e f f ec t s t h a t h av en o t b een cap t u r ed v i a o t h e r v a r i ab l e s . V a l l e d e lC au ca w as s e t t o b e t h e b en ch m ar k r eg i o n , an d a l lo t h e r r eg i o n a l e f f ec t s w e r e e s t i m a t ed r e l a t i v e t o t h a tr eg ion .

Q u ad r a t i c an d l i n ea r f u n c t i o n a l f o r m s w er e e s t i -m a t e d u s i n g a G L M p r o c e d u re . E s t i m a t e s o f th eq u ad r a t i c f u n c t i o n a l f o r m , w i t h c r o s s e f f ec t s b e t w eenp r i ce an d v i o l en ce ( n eg a t i v e co e f f i c i en t ) , d i d n o tp r o v i d e s u p e r i o r r e s u l t s an d a r e n o t p r e s en t ed . T h el ag r e l a t i o n s h i p s r e s u l t ed i n s i g n i f i can t l y s u p e r i o rr e s u l t s co m p ar ed t o t h e o t h e r r e l a t i o n s h i p s i n o n l yo n e e s t i m a t e , an d t h e r e f o r e o n l y o n e l ag r e s u l t w i l lb e p r e s en t ed . T h e r ea l i n t e r e s t r a t e v a r i ab l e w asas s o c i a t ed w i t h a n eg a t i v e v a l u e , an d w as n o t s i g n i f i -can t . T h i s r e s u l t , a l t h o u g h o p p o s i t e t o t h e t h eo r y ,m ak es s en s e u n d e r t h e s i t u a t i o n i n C o l o m b i a a sd es c r i b ed ab o v e . T h e i n acces s i b l e c r ed i t p r o g r am sm ad e en t r ep r en eu r s n o t i n t e r e s t ed i n i n v es t m en t s ,ev en w i t h v e r y l o w ( n eg a t i v e ) r ea l i n t e r e s t r a t e s . T h eag g r eg a t ed c l i m a t e v a r i ab l e w as t h e o n l y v a r i ab l e i nt h e g r o u p o f en v i r o n m en t a l v a r i ab l e s t h a t w as a s s o c i -a ted wi th a s ign i f ican t coef f ic ien t in a l l r eg ress ions ;therefo re , i t w i l l be p resen ted .

T h e r e s u l t s s h o w n i n T ab l e s 3 an d 4 p l ace a d o l l a rv a l u e o n s ev e r a l v a r i ab l e s f o u n d t o a f f ec t p r i v a t ei n v es t m en t i n i r r i g a t i o n i n C o l o m b i a . T h e e f f ec t o fv i o l en ce o n i n v es t m en t i n a l l e s t i m a t e s i s n eg a t i v ean d s h o u l d b e i n t e r p r e t ed i n t h e f o l l o w i n g w ay ( T a -b l e 3 ) : A n i n c r eas e i n v i o l en ce b y o n e ca s e p e r1 0 0 0 0 0 i n h ab i t an t s r ed u ces p r i v a t e i n v es t m en t b ya b o u t U S $ 0 . 1 1 / k m 2 o f a r a bl e l a n d f o r t h e l i n e a re s t im a t e s . A n i nc r e a se i n r e v e n u e b y U S $ 1 / h a o fi r ri g a t ed l an d i n c r eas es p r i v a t e i n v es t m en t b y U S$

0 . 0 0 0 1 / k m 2 o f a r a b le l a n d ( t h is v a r i a b l e w a s f o u n dt o b e n o t s i g n i f ican t ) . A n i n c r eas e i n t he v a l u e o f th ec l i m a t e v a r i a b l e b y 1 u n i t ( a c o m b i n a t i o n o f t e m p e r a -t u r e , r a i n f a l l , r a i n f a l l d ay s , an d h u m i d i t y ) r ed u cesi n v e s t m e n t i n i r r ig a t io n b y U S $ 0 . 0 0 5 4 / k m 2 o farab le land . The 21 r eg ions d i f f er s ign i f ican t ly int h e i r r e s p o n s es , a s i s r e f l ec t ed i n t h e e s t i m a t ed co e f -f i c i en t v a l u es a s s i g n ed t o t h e 2 1 d u m m y r eg i o n a lv a r i ab l e s .

T ab l e 4 p r o v i d es ad d i t i o n a l r e s u l t s f o r a q u ad r a t i cf u n c t i o n a l f o r m s t h a t w e r e e s t i m a t ed . H e r e , t h e p r i cev a r i ab l e r ep l aced t h e r ev en u e v a r i ab l e , an d b o t hp r i ce an d v i o l en ce h av e a q u ad r a t i c e f f ec t . I n E q . 3Table 3Results of the l inear estimates of factors affect ing private invest-ment in irr igation projectsVariable Dependen t va r iab le i s reg iona l p r iva te inves tmen t

Eq. I Eq, 2Es t imated t -va lue Es t imated t -va luecoef f ic ien t coef f ic ien t

Intercep t 113.75 10.06 125.53 3.42Violence -0. 107 - 1 .55 -0. 106 - 1 .53Reven ue (L000099 0.21 0.000098 0.21Clima te 0.0054 - 0 .34RegionAnti oquia - 91.03 6.69 - 98.03 - 3 .94Atlfi ntico - 77.3 4 - 6.00 - 86.70 - 2.83Boliv~ir - 108.35 -8 .3 3 117.15 -4. 01Boyacfi . -78 .40 -6 .18 - -87 .92 -2 .84Caldas - 88.40 - 7 .00 - 94.56 4.25Caque ta -103 .7 5 -8 .20 - 105.32 - -7 .79Cauc a - 105.64 -5 .8 6 111.35 - 4.5(/Cesa r - 71.56 - 5.68 - 80.25 - 2.80Cdrdoba - 107.27 -8. 41 115.68 --4.13Cundi namar ca - 64.18 - 5 .04 - 72.85 2.54Guaj ira - 102.38 -8. 13 112.57 --3.43Hui la -83 .95 -6 .63 - 91 .86 3 .44Magda lena -95 .68 7.53 106.03 - 3 .19Meta 102.96 - 8.03 103.86 - 7.9 INar i fio -106 .9 6 -8 .31 115.97 -3 .91N. de Sant ande r - 98.96 - 7.84 108.23 - 3.57Quin dio -95 .09 7.53 - 101.12 4.61Risarald a 84.73 - 6 .62 - 90.27 4.33Santander 106.42 -8. 42 114.33 - 4 .28Tol ima -79 .69 6 .18 -84 .91 - 4 .21

R-square 0.428 0.428N 224 224F 6.84 6.52


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12 A . D i n a r , A . K e c k / A g r i c u l t u r a l E c o n o m i c s 1 6 ( 19 9 7 ) 1 - 1 5Table 4Resu l t s o f the quadra t ic es t imates o f fac tors a f fec t ing p r iva te inves t men t in i r r iga t ion p ro jectsVar iab le Dependen t va r iab le i s reg iona l p r iva te inves tmen t

Eq. 3 Eq. 4 Eq. 5 aEs t imated t -va lue Es t imated t -va lue Es t imatedcoef f ic ien t coef f ic ien t coef f ic ien t

t -va lue D 0

Interc ept 195.95 10.45 195.34 10.39 231.9 6 12.50Viole nce -0. 798 - 2 .80 -0. 811 - 2 .85 - 1 .22 - 4 .30(Viole nce) 2 0.00253 2.03 0.00265 2.10 0.00402 3.23Price 0.00117 0.77 0.0154 0.94 0.00320 0.17(Price) 2 - 0.0 000 172 - 1.00 - 0.0 000 190 - 1.08 0.00 0023 6 - 1.22Credit 4 .18 0.60 15.42 2.I8R e g i o nAnti oquia - 141.86 -7. 59 - 139.94 -7. 37 - 151.31 -7. 92Athinti co - 147.18 -8. 66 - 147.75 -8. 66 - 161.54 -9. 40Boliv~ir - 181.30 - 10.72 - 182.36 - 10.70 -2 07. 94 - 12.13Boyac~ - 137.43 -7. 78 - 136.71 -7. 71 - 155.72 -8. 76Caldas - 138.13 -7. 48 - 136.41 -7. 29 - 146.83 -7. 82Caqueta - 151.95 -8. 05 - 149.84 -7. 79 - 165.38 -8. 57Cauc a - 156.50 -9 .88 - 156.21 -9 .8 4 - 167.12 - 10.38Cesar - 117.86 -5. 98 - 114.97 -5. 66 - 135.58 -6. 57C6r dob a - 171.27 - 10.69 - 171.69 - 10.69 - 188.17 - 11.59Cundi nama rca - 127.86 -7. 19 - 127.45 -7. 16 - 154.08 -8. 64Guaj ira - 150.24 -7. 68 - 147.71 -7. 37 - 165.32 -8. 21Huila - 144.15 -8. 42 - 143.71 -8. 37 - 161.01 -9. 33Magda lena - 149.43 -8. 64 - 148.10 -8. 48 - 163.52 -9. 31Meta - 149.63 -8. 11 - 147.54 -7. 85 - 159.02 -8. 43Narifio - 175.43 -9. 57 - 175.22 -9. 54 -201.0 3 - 10.99N. de Santander - 156.14 -8. 46 - 154.83 -8. 32 - 179.53 -9. 66Quin dio - 146.33 -8. 65 - 145.45 -8. 55 - 156.64 -9. 11Risaral da - 106.40 -6. 18 - 104.36 -5. 93 - 116.55 -6. 58Sant ande r - 163.92 - 9.85 - 163.54 - 9.80 - 179.85 - 10.68Toli ma - 140.05 -8. 56 - 139.75 -8. 53 - 159.28 -9. 53

R-square 0.514 0.515 0.549N 235 235 234F 9.25 8 .87 10.11a One-year lags for Violence ahd Price are used.b Dur bin -Wat son D test was run for the lag estimat es for each region.* No autocorrelation; * * incl usive positive autocorrelation.

in Table 4 , the var iab les are v io lence and pr ice , andi n E q . 4 i n T ab l e 4 , t h e d u m m y v a r i ab l e fo r c r ed i t isa l so included . In bo th equat ions the specia l reg ionale f f ec t s ar e cap t u red v i a t h e d u m m y reg i o n a l v a r iab l e .V i o l en ce h as a n eg a t i v e e f f ec t o n p r iv a t e i n v es t m en t ,bu t the squared re la t ionsh ip (V io lenc e 2) has a pos i -t iv e e f f ec t . Ho w ev er , t h e o v e ra l l e f f ec t o f v i o l en ceo n p r i v a t e i n v es t m en t , i n t h e r an g e o f v a l u es fo r t h evarious regions, is s t i l l negat ive.

T h e ag g reg a t ed p r i ce e f f ec t o n p r i v a t e i n v es t m en ti s pos i t ive and d iminishes as pr ices increase . This i s

also in agreement with previously published resultsin the f ie ld of technology adoption, and also inagreem ent with studies reviewed earlier tha t est i-mated pr ice -policy e f fec t s on pr ivate investment ingeneral, and in Latin Am erica countries. The creditdum my variable suggests that private investm ent hasbeen posit ively affected by the expanded package ofcredit programs offered by the government start ingin 1990. Holding all other factors constant, privateinvestment dur ing 1990 to 1992 w as higher than inyears pr ior to 1990 , by US$ 4 . 18 /km 2 . The cred it


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A . D i n a r , A . K e c k /A g r i c u l t u r a l E c o n o m i c s 1 6 (1 9 9 7) 1 - 1 5

T a b l e 5R e s u l t s o f t h e e s t i m a t e s o f f a c t o r s a f f e c t in g p r i v a t e i n v e s t m e n t i n i r r i g a t i o n p r o j e c t s ( n a t i o n a l l e v e l a n a l y s i s )

13

V a r i a b l e D e p e n d e n t v a r i a b l e i s a g g r e g a t e d p r i v a t e i n v e s t m e n t in Y e a r tE q . 6 E q . 7E s t i m a t e d c o e f f i c i e n t t - v a l u e E s t i m a t e d c o e f f i c i e n t t - v a l u e

I n t e r c e p t 1 0 9 4 . 0 7 4 . 0 4 5 7 3 . 1 3 1 . 28V i o l e n c e ( Y e a r t - 1 - 0 . 7 8 4 - 3 . 6 9 - 0 . 9 5 8 - 4 . 1 6P r i c e [ Y e a r t - 1 ) 0 . 0 2 0 0 . 0 5 8 1 . 5 7 5 1 . 37P u b l i c i n v e s t m e n t ( Y e a r t - 1 ) 0 . 0 0 6 5 8 1 . 22 0 . 0 0 3 5 0 . 6 6C r e d i t 7 5 9 . 3 9 1 .4 1V 1 0 9R - s q u a r e 0 . 7 7 3 0 . 8 4 8D u r b i n - W a t s o n 1 .8 7 9 1 . 59 4

v a r i ab l e , a l t h o u g h h av i n g p o s i t i v e e f f ec t , w as n o ts i g n i f i can t . T h e s p ec i a l r eg i o n a l e f f ec t s w e r e cap -t u r ed b y t h e r eg i o n a l d u m m y v a r i ab l e , an d h av em ag n i t u d es s i m i l a r t o t h e r e s u l t s s h o w n i n T ab l e 3 .

E q . 5 i n T ab l e 4 p r e s en t s t h e r e s u lt s o f e s t i m a t edr e l a t i o n s h i p s t h a t i n c l u d e e f f ec t s o n p r i v a t e i n v es t -m en t i n Y e a r t o f v i o l en ce an d p r i ce s o ccu r r i n g i nY e a r t - 1 , a s w e l l a s t h e d u m m y c r ed i t v a r i ab l e .T h e r e s u l t s f o r t h e l ag e s t i m a t e i n d i ca t e t h a t v i o l en cean d p ri ce e f f ec t s i n Y e a r t - 1 an d c r ed it co n d i t io n ss i g n i f i can t l y a f f ec t i n v es t m en t d ec i s i o n s m ad e i nY ea r t .

T ab l e 5 p r e s en t s t h e r e s u l t s o f e s t i m a t e d n a t i o n a l -l ev e l r e l a t i o n s h i p s t h a t i n c l u d e t h e e f f ec t s o n p r i v a t ei n v e s t m e n t o f I - y e a r - l a g g e d p u b li c i n v e s t m e n t , v i o -l en ce , an d ag g r eg a t ed c r o p p r i ce . T h e r e s u l t s s h o w ni n T ab l e 5 i n d i ca t e t h a t , a l s o o n an ag g r eg a t edn a t i o n a l l ev e l , t h e v i o l en ce an d p r i ce v a r i ab l e s h av es i g n i f i can t e f f ec t s o n p r i v a t e i n v es t m en t . P u b l i c i n -v e s t m e n t e n h a n c e s p r i v a t e i n v e s t m e n t , a n d i m p r o v e dc r e d i t c o n d i t i o n s , a s m e a s u r e d b y t h e d u m m y v a r i -a b l e , i n c r e a s e p r i v a t e i n v e s t m e n t . D u r b i n - W a t s o nt e s t r e s u l t s s u g g es t n o au t o co r r e l a t i o n b e t w een t h el ag g ed v a r i ab l e s .

6 . Conc lus ionsT h e av a i l ab l e d a t a o n p u b l i c an d p r i v a t e i n v es t -

m en t in i r ri g a t i o n an d d r a i n ag e i n C o l o m b i a u s ed i nt h i s p ap e r s u p p o r t t h e a r g u m en t t h a t p r i v a t e i n v es t -m en t h a s d ec l i n ed o v e r t i m e ( a l t h o u g h i t i n c r ea s ed

b e t w een 1 9 9 0 an d 1 9 93 ). T h e an a l y s i s i n t h i s p ap e rf o cu s ed o n d e t e r m i n i n g t h e f ac t o r s a f f ec t i n g p r i v a t ei n v es t m en t i n i r r i g a t i o n i n C o l o m b i a . T o q u an t i f y t h ed e t e r m i n an t s a f f ec t i n g p r i v a t e i n v es t m en t , t h e p ap e rd r aw s o n p r ev i o u s l i t e r a t u r e o n ad o p t i o n o f i r r i g a t i o nt ech n o l o g i e s i n g en e r a l , an d l i t e r a t u r e o n i n v es t m en td e t e r m i n a n t s i n L a t in A m e r i c a n c o u n t ri e s .

T h r e e s e ts o f v a r i a b l e s t ha t m a y a f f e c t i n v e st m e n td ec i s i o n s w er e co n s i d e r ed : p h y s i ca l v a r i ab l e s t h a tr ep r e s en t l o ca l co n d i t i o n s , i n c l u d i n g c l i m a t e ; a s o c i a lv a r i ab l e , v i o l en ce ; an d eco n o m i c - p o l i cy v a r i ab l e s ,i n c l u d i n g c r o p p r i ce an d c r ed i t co n d i t i o n s , an d p u b l i ci n v es t m en t i n i r r i g a t i o n p r o j ec t s . S ev e r a l ad d i t i o n a lv a r i ab l e s co n s i d e r ed d i d n o t p r o v i d e g o o d r e s u l t s an dw er e n o t p r e s en t ed .

T h e e s t i m a t e d r e l a t i o n s h i p s e x p l a i n 4 2 - 5 5 % o ft h e v a r i a n c e i n p r i v a t e i n v e s t m e n t a m o n g r e g i o n san d o v e r t im e , an d ab o u t 8 0 % o f t h e v a r i an ce i np r i v a t e i n v es t m en t a t t h e n a t io n a l l ev e l . T h e c l i m a t ev a r i ab l e a f f ec t s t h e i n v es t m en t s u ch t h a t i n r eg i o n sw i t h f av o r ab l e c l i m a t e co n d i t i o n s , i n v es t m en t i n i r r i -ga t ion i s l ess a t t r ac t ive . V io lence i s a s ign i f ican tf ac t o r t h a t n eg a t i v e l y a f f ec t s p r i v a t e i n v es t m en t . F i -n a l l y , ag r i cu l t u r a l p r o f i t ab i l i t y t h a t r e f l ec t s g o v e r n -m en t c r o p - p r i ce p o l i cy p r o m o t es i n v es t m en t i n i r r i -g a t i o n . A n ad d i t i o n a l i m p o r t an t r e s u l t i s t h a t t h e r ea r e s i g n i f i can t d i f f e r en ces ac r o s s t h e an a l y zed r e -g i o n s . T h es e d i f f e r en ces m ean t h a t , w h i l e h o l d i n g a l lo t h e r f ac t o r s co n s t an t , t h e r e a r e o t h e r r eg i o n a l e f f ec t st h a t i n f l u en ce i n v es t m en t d ec is i o n s . P u b l i c i n v es t -m en t i n i r r i g a t i o n i n C o l o m b i a , a l t h o u g h r e l a t i v e l yh i g h , can s t i l l en h an ce an d d i r ec t p r i v a t e i n v es t m en t .


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14 A. Dinar, A. Keck /Agri cult ural Economics 16 (1997) 1-1 5

The analys i s ind ica tes tha t pub l i c inves tment in i r r i -ga t ion can be used as a po l i cy too l . Reg ional da ta , i fav a i l ab le , co u l d p ro v i d e m o re s p ec i f i c re s u l ts .

T h e r e s u lt s o f t h is an a l y s i s co u l d b e u s ed t o g u i d ep o l i cy mak e r s i n en h an c i n g i n v es t men t i n i r r i g a t i o n .T h e r e s u l t s p ro v i d e b o t h q u an t i t a t i v e meas u re s fo rt h e d i f f e r en t e f f ec t s , an d t h ey p ro v i d e s o me i n d i ca -t i o n fo r r eg i o n a l p r e f e r en ces . S i n ce r eg i o n s d i f f e rs i g n i f i can t l y i n c l i ma t e an d w ea t h e r co n d i t i o n s , an di n n a t u r a l l an d en d o w men t s , d i f f e r en t i a l c r ed i t p ro -g rams co u l d b e t a i l o r ed t o d i f f e r en t r eg i o n t y p es ,g i v en t h a t a l l o t h e r co n d i t i o n s r ema i n t h e s ame .T h es e p ro g rams may t ak e i n t o acco u n t t h e r e l a t i v eadvan tages fo r i r r iga ted agr icu l tu re in the var iousr eg i o n s o f Co l o mb i a . Pu b l i c i n v es t men t co u l d , i f n ospecia l soc ia l p lans ex i s t , focus on ly on improv ingan d ex p an d i n g t h e i n f r a s t ru c t u r e n eed ed t o fu r t h e ren co u rag e p r i v a t e i n v es t men t , i n s t ead o f d ev e l o p i n gaddi t ional , ' i nef f i c ien t ' i r r iga t ion p ro jec t s .

A c k n ow l e d ge m e n t sT h e au t h o r s w o u l d l i k e t o t h an k Ro d r i g o L o s ad a ,

a n d t h e C o l o m b i a n A g e n c i e s D N P , F I N A G R O , a n dH IMA T fo r h e l p i n t h e s t ag e o f d a t a co l l ec t i o n an dresu l t s in terp re ta t ion , and to Maggie Wu for ass i s -t an ce i n d a t a p ro ces s i n g . H e l p fu l co mmen t s w erep ro v i d ed b y Fe l i p e J a r ami l l o , t w o j o u rn a l r ev i ew er s ,an d t h e j o u rn a l ed i t o r. A n ea r l i e r Sp an is h v e r s i o n o ft h i s p ap e r w as p u b l i s h ed i n D i n a r an d K eck (1 9 9 5 ) .T h e v i ew s ex p re s s ed i n t h e p ap e r s h o u l d n o t b ea t t ri b u t ed t o t h e W o r l d Ban k .

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