¹ Seminal demand-induced models of institutional change include Hayami, Yujiro and Ruttan, Vernon W., Agricultural Development: An International Perspective (Baltimore, 1971);Google ScholarDavis, Lance E. and North, Douglass C., Institutional Change and American Economic Growth (London, 1971);CrossRefGoogle Scholar and North, Douglass C. and Thomas, Robert Paul, The Rise of the Western World: A New Economic History (London, 1973).CrossRefGoogle Scholar

Later works that explicitly or implicitly include the supply of institutional change include several by Ruttan, Vernon W.: “Induced Innovation and Agricultural Development,” Food Policy, 2 (08 1977), 196–216,CrossRefGoogle Scholar“Induced Institutional Change,” in Induced Innovations: Technology, Institutions, and Development, ed. Binswanger, Hans and Ruttan, Vernon W. (Baltimore, 1978), pp. 327–57Google Scholar, “Institutional Innovations,” in Distortions of Agricultural Incentives, ed. Schultz, Theodore W. (Bloomington, Indiana, 1978), pp. 290–304Google Scholar, “Some Empirical Evidence on Induced Technical Change in Agriculture,” in International Economic Development and Resource Transfer: Workshop 1978, ed. Giersch, Herbert (Kiel, 1978), pp. 193–226Google Scholar, “Induced Institutional Innovation,”, Agricultural Economics Research, 31 (07 1979), 32–35Google Scholar, “Bureaucratic Productivity: The Case Of Agricultural Research,”, Public Choice, 35 (1980), 529–47CrossRefGoogle Scholar, and “Three Cases of Induced Institutional Innovations,” in Public Choice and Rural Development, ed. Russell, Clifford S. and Nicholson, Norman K. (Washington, D.C., 1981), 239–70;Google Scholar the following by Feeny, David: “Technical and Institutional Change in Thai Agriculture, 1880–1940” (Ph.D. diss., University of Wisconsin-Madison, 1976)Google Scholar, “Induced Technical and Institutional Change: A Thai Case Study,” in The Past in Southeast Asia's Present, ed. Means, Gordon P. (Ottawa, 1978), 56–69Google Scholar, and The Political Economy of Productivity: Thai Agricultural Development, 1880–1975 (Vancouver, 1982);Google ScholarGuttman, Joel M., “Interest Groups and the Demand for Agricultural Research,” Journal of Political Economy, 86 (06 1978), 467–84CrossRefGoogle Scholar, and “Villages as Interest Groups: The Demand for Agricultural Extension Services in India,” Kyklos. 33 (1980), 122–4l;CrossRefGoogle ScholarKikuchi, Masao and Hayami, Yujiro, “Agricultural Growth Against a Land Constraint: A Comparative History of Japan, Taiwan, Korea, and the Philippines,” this JOURNAL, 38 (12 1978), 839–64;Google ScholarNorth, Douglass C., Structure and Change in Economic History (New York, 1981);Google Scholar and A.Roumasset, James,“The New Institutional Economics and Agricultural Organization,” Philippine Economic Journal, 17 (1978), 331–48.Google Scholar

² See Kikuchi, and Hayami, , “Agricultural Growth,” and “New Rice Technology and National Irrigation Development Policy,” in International Rice Research Institute, Economic Consequences of the New Rice Technology (Los Banos, Philippines, 1978), 315–32;Google ScholarHayami, Yujiro and Kikuchi, Masao, “Investment Inducements to Public Infrastructure: Irrigation in the Philippines,” Review of Economics and Statistics, 60 (02. 1978), 70–77;CrossRefGoogle Scholar and Hayami, Yujiro et al. , “Agricultural Growth Against a Land Constraint: The Philippine Experience,” Australian Journal of Agricultural Economics, 20 (12 1976), 144–59. The induced institutional change hypothesis indicates that the growing land scarcity would create demands for the development of institutions to increase land productivity–socialized agricultural research facilities and an irrigation department. The induced public investment hypothesis is that the level and timing of irrigation investments and level of agricultural research funding would be determined in order to maximize social welfare–that the complements to the institutional changes of the creation of an irrigation authority and agricultural research facilities would also be induced.CrossRefGoogle Scholar

³ For the Philippine case, David, Cristina Crisostomo and Barker, Randolph (“Agricultural Growth in the Philippines, 1948–1971,” in Agricultural Growth in Japan. Taiwan, Korea. and the Philippines, ed. Hayami, Yujiro, Ruttan, Vernon W., and Southworth, Herman M. [Honolulu, 1979], pp. 117–42 and 351–88) argue that agricultural productivity declined in this period. Feeny (“Technical” and Political Economy) argues that there were productivity declines in Thai agriculture in general and in the Central Plain in particular in this period. The Ricardian hypothesis accounts for a significant portion (38 to 70 percent) of the yield decline (0.93 percent per year, 1920/21 to 1941) in the Central Plain but does not fully account for the decline in land productivity.Google Scholar

⁴ Kikuchi and Hayami, “Agricultural Growth,” estimate the marginal cost-benefit ratio of clearing additional land or investing in another irrigation project according to the formula given in equation (I). where C = annual service flow of initial capital investment and the annual costs of operations and maintenance per hectare, B = annual benefit flow due to the investment per hectare, K = capital cost per hectare, A = annual operation and maintenance cost per hectare, i = interest rate, m = median year of the capital construction period, n = period of usable life. Equation (2) was used to estimate the internal rates of return on the irrigation and land-clearing projects. The internal rate of return, r, is the interest rate that satisfies equation (2).

⁵ The point is raised in Ishikawa, Shigeru, Economic Development in Asian Perspective (Tokyo, 1967);Google Scholar and Siamwalla, Ammar, “Comments on New Rice Technology and National Irrigation Development Policy,” in International Rice Research Institute, Economic Consequences of the New Rice Technology (Los Banos, Philippines, 1978), 333–35;Google Scholar and is explored in detail in Ngo, QuocTrung, “An Economic Analysis of Water Resources Development in Deltaic Regions of Asia: The Case of Central Thailand,” (Ph.D. diss., University of Wisconsin-Madison, 1980). Ngo discusses both the Thai case and the case of the potential development of the Mekong basin. He specifically argues that for the Central Plain of Thailand, because of the large initial investment, it would not have been socially profitable to have invested in irrigation in Thailand in the pre-World War II period. It should be noted that in northern Thailand where the river valleys make small-scale projects feasible, there is a well-developed tradition of local cooperative irrigation schemes.Google Scholar

⁶ Thai irrigation development is discussed in Feeny, David, “Paddy, Princes, and Productivity: Irrigation and Thai Agricultural Development, 1900–1940,” Explorations in Economic History, 16 (04 1979), 132–50, and Political Economy;CrossRefGoogle ScholarMongkolsmai, Dow, “Distributional Effects and Reimbursement Analysis of an Irrigation Project in Thailand” (Ph.D. diss., Cornell University, 1977);Google ScholarIngram, James C., Economic Change in Thailand: 1950–1970, 2nd ed. (Stanford, 1971);Google ScholarKambhu, M. L. X., Report on Irrigation and Drainage and Water Communication Project of Chao Phya River Plain (Bangkok, 1949);Google ScholarNgo, , “Economic Analysis”; and Leslie Eugene Small, “An Economic Evaluation of Water Control in the Northern Region of the Greater Chao Phya Project of Thailand” (Ph.D. diss., Cornell University, 1972);Google Scholar and Returns to Public Investment in Water Control in Southeast Asia: A Case Study of the Greater Chao Phya Project of Thailand, Cook College Bulletin 842 (New Brunswick, New Jersey, 1975). It should be noted that irrigation projects in Central Thailand required central coordination and large, lumpy investments. Thus, the government played a crucial role in irrigation.Google Scholar

⁷ Silcock, T. H., “Money and Banking,” in Thailand: Social and Economic Studies in Development, ed. Silcock, T. H. (Canberra, 1967), p. 173Google Scholar, and The Economic Development of Thai Agriculture (Ithaca, 1970), p. 65.Google Scholar

⁸ The formulas for estimating the marginal cost-benefit ratios and internal rates of return are given in footnote 4.

⁹ Van der Heide argued that with irrigation the farmers would be better able to spread their land preparation over a longer time. Thus the area under cultivation would have grown more rapidly with the irrigation project than it in fact did. Therefore by using the actual areas under cultivation (up to the limit of the capacity of the irrigation project, which was a binding constraint for the 1933/34 through 1937/38 period), there is a tendency to overestimate the costs of the project per hectare and underestimate the total benefits of irrigation. The area under cultivation used for the estimates is the five-year average centered on the year indicated.

¹⁰ In fact a number of observations on the paddy yields of pre- and post-irrigation projects in Thailand indicate significantly higher increases in average yields; for more detail and discussion see Feeny, , “Technical,” “Paddy,” and Political Economy. On the relationship between paddy yields and irrigationGoogle Scholar, see also Hsieh, S. C. and Ruttan, V. W., “Environmental, Technological, and Institutional Factors in the Growth of Rice Production: Philippines, Thailand, and Taiwan,” Food Research Institute Studies, 7 (1967), 307–41.Google Scholar

¹¹ The method assumes that agricultural labor services had an opportunity cost, if not in terms of foregone alternative production, then in terms of foregone leisure.

¹² Although proposals for seed development research were discussed in the interwar period, very little research was actually undertaken. A 15 percent increase in paddy yields is consistent with the gains realized in other Asian countries during the interwar period and the gains realized in Thailand in the early post-World War II period; see Feeny, , Political Economy. It should be noted that while officials were aware of a potential for gains in productivity through rice breeding, the potential had not yet been realized and would have been less obvious in the interwar period than it is today.Google Scholar

¹³ The estimates are presented in Feeny, “Paddy,” and Political Economy. Benefits were estimated under several assumptions about the effects of irrigation on paddy yields in the wet season, thus giving the 19 to 22 percent range for the ex post internal rate of return estimate. Counterfactual ex ante estimates ranged from 11 to 17 percent. The ex post estimates utilize actual rice export prices for the period 1911/12 to 1940; the ex ante estimates use late nineteenth-century rice export prices.

¹⁴ See Hanks, Lucien M., Rice and Man: Agricultural Ecology in Southeast Asia (Chicago, 1972);Google ScholarMoerman, Michael, Agricultural Change and Peasant Choice in a Thai Village (Berkeley, 1968);Google ScholarPelzer, Karl J., Pioneer Settlement in the Asiatic Tropics: Studies in Land Utilization and Agricultural Colonization in Southeastern Asia (New York, 1945);Google Scholar and Boserup, Ester, The Conditions ofAgricultural Growth: The Economics of Agrarian Change under Population Pressure (Chicago, 1965).Google Scholar

¹⁵ Trent Bertrand and Lyn Squire found that geographic differences in wage rates for unskilled workers in Thailand are not very substantial (“The Relevance of the Dual Economy Model: A Case Study of Thailand,” Oxford Economic Papers, 32 [11 1980], 480–511). They further argue that when regional differences in the cost of living are taken into account, “it is doubtful that a positive differential exists in real terms” (p. 508). Their evidence is for the 1970s; labor mobility was also substantial in the interwar period. Thus, the difference between rural and urban wages and the bias imparted by using urban wages is likely to be minimal.Google Scholar

¹⁶ The measure of benefits as gross value added is the most relevant one. For comparability with the irrigation case the estimates with the deduction for extra harvest labor costs were also included.

¹⁷ The estimated rates of return on counterfactual pre-Worid War II Thai irrigation investments reported here and in Feeny, , “Paddy,” and Political Economy contrast with the relatively modest estimated rates of return on the Greater Chao Phya project reported in Small, “Economic Evaluation,” Returns, and Ngo, “Economic Analysis,” Two major factors appear to account for the differences in the estimates, which for the most part were similarly constructed. First, as was already pointed out, van der Heide's proposal called for a higher dam than was actually built and thus would have commanded a larger project area—generating larger benefits. Second, the percentage of the planted area that was damaged in the interwar period appears to have exceeded the percentage area damaged during the post-World War II period, the period upon which Ngo and Small based their estimates of the benefits of reductions in the area damaged;Google Scholar see Welsch, Delane E. and Tongpan, Sopin, “Background to the Introduction of High Yielding Varieties of Rice in Thailand,” in Technical Change in Asian Agriculture, ed. Shand, R. T. (Canberra, 1973), pp. 124–43; and Small, “Economic Evaluation.” The higher levels of benefits associated with the larger project area and higher level of reductions in the damaged area appear to account for the differences in the pre- and post-World War II cost-benefit estimates.Google Scholar

¹⁸ In order to test the sensitivity of the results to the rural-urban wage gap, a few additional estimates of the marginal cost-benefit ratio and the internal rate of return were constructed. It was argued above that labor was sufficiently mobile for real wages (rural and urban) to be driven towards equality in the Central Plain. It then follows that the difference between the urban and the rural wage would be accounted for by the difference in the cost of living. In a study based on 1970 data, Oey Meesook found that the urban-rural price differential was surprisingly small and that the lower prices for food in rural areas were roughly compensated for (and sometimes more than compensated for) by the higher costs of nonfood items. (“Regional Consumer Price Indices for Thailand,” Thammasat University, Faculty of Economics Discussion Paper No. 49 [January 1976]). If the same pattern prevailed in the interwar period, then the use of urban wages imparts no strong bias. If we ignore the higher cost of nonfood items, a lower bound estimate of the rural wage can be imputed on the basis of the difference in the retail price of rice between the villages and Bangkok. Carle C. Zimmerman found that the simple average of the price of rice in the Central Plain villages sampled was 82.1 percent of the Bangkok price. (Siam: Rural Economic Survey, 1930–31 [Bangkok, 1931]). New lower bound marginal cost-benefit ratio (and internal rate of return) estimates were then constructed by imputing the rural wage as 80 percent of the urban wage for the land clearing, 200 man-days per hectare, current price, m = 1 case, for both average and marginal yields. The results are as follows for the average and marginal yields cases (with internal rate of return estimates in parentheses): 1905/06, 0.112(60.9) and 0.162(46.5): 1922/23, 0.223(36.3) and 0.416(21.7); 1935/36, 0.376(23.6) and 0.703(13.8). Although the estimates based on lower rural wages make land clearing more attractive, the basic conclusions on the relative costs and benefits of irrigation and land clearing remain valid. See Tables 6 and 7 and Figure 1.Google Scholar

¹⁹ Royal Irrigation Department, Administration Report of the Royal Irrigation Department of Siam For the Period 2457B.E.-2468B.E. (1914–15)-1925–26) (Bangkok, 1927), p. 6.Google Scholar

²⁰ Royal Irrigation Department, Irrigation: Report on the Benefits which Have Already Accrued to the State by Irrigation Works Already Completed and What Benefits May Be Expected From Works Still to be Undertaken (Bangkok, 1929), Statement 11A.Google Scholar

²¹ In the post-World War II period, new rice experimental farms were established at other sites in the Central Plain and elsewhere in the Kingdom.

²² Estimates of actual Thai export performance and the counterfactual export performance that would have occurred with irrigation and seed development are presented in Feeny, David, “Infrastructure Linkages and Trade Performance: Thailand, 1900–1940,” Explorations in Economic History, 19 (01 1982), 1–27.CrossRefGoogle Scholar