Input Demand and Substitution Effects in Upcountry Vegetable Cultivation in Sri Lanka

The objectives of the study are to estimate the input demand elasticities and compute elasticities of substitution among various inputs employed in upcountry vegetable cultivation in Sri Lanka. The research study is based on data from Cost of Cultivation (COC) surveys conducted by Department of Agriculture in Sri Lanka over 14 growing seasons from 2014/15 Maha to 2022/23 Maha for key upcountry vegetable crops namely pole bean, cabbage, and carrot. The total cost function and cost share equations were jointly estimated using Seemingly Unrelated Regressions while imposing cross-equation symmetry constraints to generate coefficients to calculate elasticities. Results revealed that both own-price and cross-price elasticities are inelastic, indicating limited responsiveness. The analysis of partial elasticities of substitution demonstrates that labor is complementary to chemical fertilizer and seed, while substituting for other inputs. Chemical fertilizer, in turn, shows a complementary relationship with seed but serves as a substitute for other inputs. Further, the complementarity between seed and both labor and fertilizer indicate a relatively fixed technological relationship among these inputs. The interdependencies among labor, fertilizer, seeds, and other inputs underscore the need for a holistic approach to input management.