Farm Capital Formation and Productivity Differentials among Small and Marginal Coconut Cultivators in Salem District, Tamil Nadu, India

Abstract

Coconut cultivation in Salem District has undergone a transition from a household plantation activity to a farm enterprise with a capital structure. Small and marginal farmers continue to cultivate the crop amid ever-increasing irrigation charges, labour shortages, high input requirements, volatile markets, and declining tree vigour. The study proposes an empirical model to examine productivity contrasts between small and marginal coconut farmers through the lens of farm capital formation. A primary survey of 384 farm households was conducted using a multistage sampling design in the coconut-growing blocks of Salem District. The Farm Capital Formation Index was computed as a composite measure comprising irrigation assets, plant protection expenditure, post-harvest assets, soil fertility investment, mechanisation, and replanting expenditure. Productivity was measured in terms of annual nuts per acre and net return per acre. The analytical approach involved robust regression with HC3 standard errors, quantile regression, Oaxaca-Blinder decomposition, propensity score matching, and Garrett ranking. The empirical results revealed a stronger relationship between productivity and capital formation than between productivity and land size alone. Irrigation assets, replanting expenditure, credit adequacy, and market-linked investment contributed substantially to the productivity gap between small and marginal cultivators, of which 67.02 per cent was explained by observed factors. The quantile estimates indicated that capital formation had a greater effect on productivity among higher-performing cultivators, as assets were used more effectively when irrigation practices, tree management, and market timing improved. These findings support credit-linked irrigation investment, rejuvenation assistance, and farm-level productive asset formation in coconut-based livelihoods.