Layer Production In Ghana: A Cost Function Approach

ABSTRACT

This study tries to find out why the Ghanaian

Poultry Industry is unable to produce enough poultry

chicken to meet the local market demand which has led

to the large importation of frozen chicken for the

period 1988-1999. It determines how responsiveness

major poultry inputs such as vaccines, feed, labor and

institutional credit are to price change and the

economies of scale of layer production in the poultry

industry.

The study therefore estimates parameters of the

input variables from the cost function and cost share

equations, Allen Partial Elasticities of Substitution

between inputs. These estimations are used in

computing own price elasticities of demand for the

poultry inputs, cross price elasticities of factor

demand and scale elasticities in layer production over

the period 1988-1999.

The study also sought to determine what

production function that best describes layer production in

the Ghanaian Poultry Industry.

The study's empirical econometric results

indicate that a production function, which is characterized

by non-homotheticity, non-homogeneity, non-unitary

elasticities of substitutions, and non Cobb-Douglas model

is required to adequately represent the production of

layers by the Ghanaian Poultry Industry implying no

restrictions on the production function. It is therefore a

Constant Elasticity of Substitution production function.

Inputs are found to be highly elastic which means that

when their price rise the quantity demanded drastically

falls. The relatively high price elasticities of the inputs

indicate non-optimum production by poultry firms hence

inability of meeting the market's demand.

Layer production in the Poultry Industry exhibited

both economies and diseconomies of scale over the study

period 1988-1999. There was eight years of positive

economies of scale with only four years of diseconomies of

scales.