ASSESSMENT OF COMPARATIVE ADVANTAGE OF HORSE BEAN AND LENTIL PRODUCTION IN BASONA WERANA DISTRICT, NORTH SHEWA, ETHIOPIA
Fresenbet Zeleke and Gezahegn Ayele
Abstract: With increasing economic liberalization, domestic agricultural productionis dependent on supply of tradable agricultural inputs, and the price structures of inputs and growth of output. Such dependency in turn affects the competitiveness of smallholders’ crop production. This paper applies the Policy Analysis Matrix (PAM) framework to examine the performance and competitiveness of smallholders’ horse bean and lentil (local and improved varieties) production in Basona Werana district. In addition, the level of protection or price distortion in the input and output markets of the three crops under the study were indicated by policy indicators such as the nominal and effective protection coefficients and the domestic resource cost ratios. Results indicate that both the financial and economic profitability are higher for local lentil than for horse bean and improved lentil productions. The negative divergence effects between private and social values of outputs and costs of production show that productions of the three crops were implicitly taxed on their final outputs while, on the contrary, subsidized on the use of both tradable as well as domestic inputs. The results were also found to be sensitive to the world price situation.