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UBC Theses and Dissertations

An evaluation of the British Columbia financial management training project Pereira-Lunghu, Jacob


The objective of this thesis is to assess the effectiveness of a financial management extension program offered to farmers in British Columbia. This assessment is done with two objectives in mind. Firstly, it could permit an improvement and revision of the course format, material and presentation. Secondly, the assessment provides information to policy makers as to the value of courses and support that should be given to this form of agricultural training. After reviewing the literature on various methods used in the evaluation of extension methods, a profit function approach was chosen as an appropriate conceptual model. Profit is defined as a function of output prices, variable input prices and fixed inputs. Variable inputs in the production process include hired labor and non-labor inputs such as fertilizer, chemicals, feed and custom work. The data gathering component of the work involved completion of a questionnaire by 73 farmers. This sample of farm operators represented different types of producers: dairy producers, beef producers, grain, nursery, orchardists, bee producers and other mixed enterprises. Data availability restricted the empirical model to a selected number of important variables: hired labor wage rate, aggregate capital (deeded and rented land, buildings, machinery and equipment and livestock), operator's labor on the farm, education, and financial management skills. A Cobb-Douglas functional form was used for the estimation of the parameters. Because of the diverse nature of the producers some aggregation problems were encountered. Attempts to alleviate this problem involved the use of dummy variables for selected homogeneous commodity groups in the samples. The most successful strategy relied on pooling of all observations. Results indicate that on average the financial management input is important in production. The estimated marginal return to financial management is $968. At the farm level 56 farmers out of a sample of 73 have a positive marginal value product to financial management. In order to assess the impact of the program ex-ante, an evaluation was carried out through a prediction equation. The expected impact of the program is positive for 51 farmers out of a population of 73. The expected average change in variable profit through participation in the course is $2089 per year, representing a 3% percent improvement in their profits.

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