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A lognormal diffusion process


applied to the growth of yields
of some agricultural crops in
India
a b
Gerhard Tintner & Malvika Patel
a
Distinguished Professor of Economics and
Mathematics , University of Southern California , Los
Angeles
b
Assistant Professor of Economics , San Fernando
Valley State College , California
Published online: 23 Nov 2007.

To cite this article: Gerhard Tintner & Malvika Patel (1969) A lognormal diffusion
process applied to the growth of yields of some agricultural crops in India, The
Journal of Development Studies, 6:1, 49-57, DOI: 10.1080/00220386908421312

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A Lognormal Diffusion Process Applied to the
Growth of Yields of some Agricultural Crops
in India
by Gerhard Tintner and Malvika Patel*
SUMMARY
A lognormal diffusion process recently has been applied to the economic
development of India by Tintner and Patel (1965, 1966). A similar process
can be suitably applied to growth in the yields of agricultural crops in
India in consideration of the vital role played by stochastic elements in
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the phenomenon. The influence of irrigation and fertilizers on yield is


also considered.
Lognormal Diffusion
Modern economics, both in its statics and its dynamics, is still essentially
deterministic, perhaps an imitation of classical deterministic physics.1
But since physics has become essentially stochastic (i.e. uses methods
related to the theory of probability) we might at least tentatively try to
utilize the method of stochastic processes in economics. A stochastic
process being a family of probability distributions whose characteristics
change over time.
By using the theory of stochastic processes we explicitly recognize the
importance of random elements. Few economists would doubt the
importance of these, especially in the field of agricultural production.
We have chosen to work with lognormal distributions, because in
economics many variables (e.g. in our case yields) cannot have negative
values. It is the logarithm of yield which is now normally distributed.
With a lognormal diffusion process we obtain lognormal probability
distributions which change over time. More specifically, the mean and the
variance of the logarithms of the yields are linear functions of time. This
means that the yields themselves have exponential trends and that their
variance is also an exponential function of time.
Similarly the assumption of a lognormal distribution is justified on the
ground that many investigations in different fields of economics,2 have
suggested that the Lognormal distribution is more useful than a Normal
or Pareto distribution. Thus the underlying assumptions of the Log-
normal Diffusion Process seem very suitable for our analysis.
Let X(t), the yield per hectare of an agricultural crop at time t, be a
random, variable of a continuous stochastic process of Markovian type,
depending on a continuous time parameter t.
* Gerhard Tintner is Distinguished Professor of Economics and Mathematics at the
University of Southern California, Los Angeles; Malvika Patel is Assistant Professor
of Economics at San Fernando Valley State College, California. Research supported by
the National Science Foundation, Washington, D.C. More extensive treatment of the
subject can be found in the Doctoral Dissertation (of M. Patel), University of Southern
California, September 1967.
D
50 THE JOURNAL OF DEVELOPMENT STUDIES
We have chosen to analyse yields for the following reasons: total
output would largely vary depending on total area under crop. The area
under crop would vary widely depending on the price ratios of various
crops. On the other hand yields (output/area under cultivation) seem to
be more influenced by random characteristics, depending upon weather
conditions.
Taking the initial time as zero, i.e. x = 0 and assuming P[X(0) = x0] = 1
(P denotes probability) the mean and variance of X(t) can be expressed as
E[X(t)] - x0 exp (bt)
V[X(t)] = x* exp (2bt) [exp (at)-l]
They are exponential functions of time.
When the observations are taken at equal time intervals the maximum
likelihood estimates of the parameters and their variances are given by
Fisz (1963, p. 489).
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We applied this model to the yields 1951-52 to 1963-64 of a few im-


portant agricultural crops of India, viz. wheat, rice, and sugar cane. The
expressions for the trends in the yields and variances based on the above
estimates are shown in Table 1.
TABLE 1
THE TREND AND VARIANCE OF THE YIELDS OF WHEAT, RICE, AND SUGARCANE IN INDIA

(1951-52 TO 1963-64)
Crop Trend and Variance
Trend: E[X(t)]
Wheat (6-63) exp [(0 02170)t]
Rice (10-60) exp [(0-036742)t]
Sugarcane (31-79) exp [(003417)t]
Variance: V[X(t)]
Wheat (6-63)* exp [(0-04340)t] exp [(001359)t—1]
Rice (10-60)* exp [(007284)t] exp [(001033)t-l]
Sugarcane (31-79)2 exp [(0-06934)t] exp [(0008661)t-l]

TABLE 2
ESTIMATES OF YIELDS PER HECTARE OF WHEAT, RICE, AND SUGARCANE IN INDIA
(1964-65 TO 1975-76)
Year / Wheat* Rice* Sugarcane*
1964-65 13 8-79 17-02 49-58
1965-66 14 8-98 17-66 51-30
1966-67 15 9-18 18-31 53-08
1967-68 16 9-38 18-99 54-97
1968-69 17 9-59 19-69 56-84
1969-70 18 9-80 20-42 58-81
1970-71 19 10 01 21-18 60-86
1971-72 20 10-23 21-97 62-97
1972-73 21 10-46 22-78 65-16
1973-74 22 10-69 23-63 67-43
1974-75 23 10-92 24-50 69-77
1975-76 24 11-16 25-41 72-20

* Wheat and rice are given in 100 kgs.; sugarcane is given in metric tons.
A LOGNORMAL DIFFUSION PROCESS APPLIED TO CROPS IN INDIA 51

Having observed a reasonably good fit of the trends, we attempt to


predict the yields for the next few years (1964-1976) by extrapolating the
estimated trends in yields of wheat, rice, and sugar cane, and they are
given in Table 2. These extrapolations depend of course on the assumption
that the technology does not change.

Influence of an Exogenous Variable


Several productive measures have been taken to raise the yields of
agricultural crops in India and we therefore apply the extended model
which considers the influence of an exogenous variable. This can be done
by considering the parameters of the process as the function of the exo-
genous variable.
Consider one of the important productive measures, irrigation. Let I(t)
denote the proportion of area irrigated under the crop to total area under
the crop at time (t) and Zll(t) = I(t)—I(t—1). The mean and variance
of X(t) are given by
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t
E[X(t)] = x0 exp(b0 exp (I ^ZAId
1
r
t
V[X(t)] = x20 exp[2(b>ot+b II, [exp (a o t)-l]

The expression for the mean and variances of X(t) considering zll(t) as
an exogenous variable, are shown in Table III. We computed the co-
efficient of variation i.e. -\/V[X(t)]/E[X(t)] in order to compare the fitted
trends employing different models. With the extended model we got in
most of the cases a smaller coefficient of variation which shows that this
model gives better estimates than those given by the simple model.
TABLE 3
THE TREND AND THE VARIANCE OF THE YIELD PER HECTARE X(t) OF WHEAT, RICE, AND
SUGARCANE IN INDIA (1951-1963)

Crop Trend and Variance


Trend: E[X(t)]
Wheat 6-63 exp [O-O3414t+l-513olMl (t)]

Rice 10-60 exp [0-2429+0-8156 27^11 (t)]

Sugarcane 31-79 exp [0O4013t+0-579827zJI (t)]

V[X(t)]
Wheat (6- 63)' exp [O-O6828t+2-826oizlI (t)] [(0-01163t)-l]

Rice (10 •60)1! exp [O-O4858t+1-634217.41 (t)] [exp (001049t)-l]

!1
Sugarcane (31 •79) exp [008026t+l-1596i J I (t)] [exp (0O05705t)-l]
52 THE JOURNAL OF DEVELOPMENT STUDIES
Having observed a better fit, we attempt to predict the values of the yields
for the next few years (1963-64 to 1975-76) under the following hypothesis
about I(t).
Consider the following different hypotheses regarding <4I(t) for rice.
(1) A yearly increase of 0-007 during the last three years of the Third
plan and of 0-019 and 0-014 during the Fourth and Fifth Plan periods
respectively, which will raise the proportion of irrigated area under rice
to total area under rice, I(t) from 38-05 per cent in 1962-63 to 39-63,
49-33, and 56-33 per cent by the end of the Third, Fourth and Fifth
Plans respectively.
(2) A yearly increase of 0-006 during the last three years of the Third
Plan and of 0-015 and 0-013 during the Fourth and Fifth Plans periods
respectively—this will raise the level of I(t) to 39-83, 47-44, and 53-83 per
cent by the end of the Third, Fourth and Fifth Plans respectively.
(3) A yearly increase of 0-007 during the last three years of the Third
Plan, and of 0-015 and 0-016 during the Fourth and Fifth Plans periods
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respectively, which will raise the level of I(t) to 40-13, 47-63, and 55-63 per
cent, by the end of the Third, Fourth and Fifth Plans respectively.
(4) A yearly increase of 0-01 in I(t) during the whole period under
consideration, i.e. during 1963-76 which will raise the level of I(t) to
41-93, 46-03, 51-03 per cent by the end of the Third, Fourth, and Fifth
Plans respectively.
The estimates for the yield per hectare of rice based on the above
alternative hypothesis about I(t) during the period of 1963-76 are shown
in Table 4.
TABLE 4
ESTIMATES FOR YIELD PER HECTARE OF RICE, X(t) FOR 1963-65 TO 1975-76

E[X(t)] Hypothesis No. About AI{t)


II III IV
1963-64 12 14-95 14-95 14-96 15-00
1964-65 13 15-39 15-39 15-42 15-49
1965-66 14 15-85 15-85 15-88 1600
1966-67 15 16-49 16-44 16-48 16-53
1967-68 16 17-16 17-05 17-09 17-07
1968-69 17 17-85 17-68 17-72 17-64
1969-70 18 18-58 18-34 18-38 18-22
1970-71 19 19-33 19-02 19-07 18-82
1971-72 20 2004 19-70 19-79 19-44
1972-73 21 20-75 20-40 20-55 2008
1973-74 22 21-52 21-12 21-33 20-74
1974-75 23 22-30 21-87 22-14 21-43
1975-76 24 23-11 22-65 22-98 22-14

Hypothesis about AI(t) for wheat.


(1) A yearly increase of 0-005 during the last three years of the Third
Plan and of 0-02 and 0-015 during the Fourth and Fifth Plan periods
respectively, which will raise the proportion of I(t) from 34-13 per unit
in 1962-63 to 35-63, 45-63 and 54-63 per cent by the end of the Third,
Fourth and Fifth Plans respectively.
(2) A yearly increase of 0-005 during the last three years of the Third
Plan and of 0-017 during the Fourth and Fifth Plan periods, respectively,
A LOGNORMAL DIFFUSION PROCESS APPLIED TO CROPS IN INDIA 53

which will raise the level of I(t) to 35-63, 44-13 and 51 -63 per cent by the
end of the Third, Fourth and Fifth Plans respectively.
(3) A yearly increase of 0-006 during the last three years of the Third
Plan and of 0-016 and 0-017 during the Fourth and Fifth Plan periods
respectively, which will raise the level of I(t) to 35-93, 43-93 and 52-43 per
cent by the end of the Third, Fourth, and Fifth Plans respectively.
(4) A yearly increase of 0-01 during the whole period under considera-
tion, that is, 1963-76, which will increase the level of zll(t) to 37-13,
42-13 and 47-13 by the end of the Third, Fourth, and Fifth Plan respec-
tively. The estimates for the yield per hectare of wheat based on the
above hypothesis are shown in Table 5.

TABLE 5
ESTIMATES FOR YIELD PER HECTARE OF WHEAT X(t) FOR 1963-64 TO 1975-76
(IN HUNDREDS OF KGS)
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E[X(t)] Hypothesis No. About AI(t)


Ypnr f
J cur II
/ III IV

1963-64 12 9-89 9-89 991 9-96


1964-65 13 10-31 10-31 10-34 10-46
1965-66 14 10-74 10-74 10-79 10-97
1966-67 15 11-63 11-39 11-42 11-52
1967-68 16 12-17 1207 12-09 12-09
1968-69 17 12-96 12-79 12-79 12-68
1969-70 18 13-79 13-56 13-54 13-31
1970-71 19 14-68 14-37 14-33 13-97
1971-72 20 15-51 15-19 15-19 14-66
1972-73 21 16-40 1605 16-10 15-39
1973-74 22 17-33 16-97 1706 16-15
1974-75 23 18-32 17-93 18 08 16-95
1975-76 24 19-36 18-95 19-17 17-78

The hypotheses considered about ^dl(t) under sugarcane are as follows:


(1) A yearly increase of 0-003 during the last three years of the Third
Plan and 0-014 ad 0-007 during the Fourth and Fifth Plan periods re-
sectively which raise the level of proportion of area irrigated under
sugarcane to total area under sugarcane I(t) from 66-62 per cent in 1962-65
to 67-52, 74-52 and 79-02 per cent by the end of the Third, Fourth and
Fifth Plan periods respectively.
(2) A yearly increase of 0-003 during the last three years of the Third
Plan and 0-011 and 0-009 during the Fourth and Fifth Plan periods
respectively, which will raise the level of I(t) to 67-52, 73-02 and 77-52 by
the end of the Third, Fourth and Fifth Plan periods respectively.
(3) A yearly increase of 0-004 during the last three years of the Third
Plan period and of 0-01 and 0-011 during the Fourth and Fifth Plan
periods respectively, which will raise the level to 67-82, 72-82 and 78-32 by
the end of the Third, Fourth and Fifth Plan periods respectively.
(4) A yearly increase of 0-007 for the whole period in consideration,
i.e. during the period 1963-76 which will raise the level of I(t) to 68-72,
72-22 and 75-72 by the end of the Third, Fourth and Fifth Plans respec-
tively.
The estimates for the yield per hectare of sugarcane, based on the
54 THE JOURNAL OF DEVELOPMENT STUDIES

above alternative hypothesis about ^I(t) during the period 1963-76 are
shown in Table 6.
TABLE 6
ESTIMATES FOR YIELD PER HECTARE OF SUGARCANE, X(t) FOR 1963-64 TO 1975-76
(IN METRIC TONS)

E[X{t)] Hypothesis No. About AI(t)


Yenr f
i tzur I
/ II III IV

\9tt-€A 12 44-50 44-58 44-61 44-69


1964-65 13 46-49 46-44 46-54 46-71
1965-66 14 48-48 48-48 48-56 48-82
1966-67 15 50-87 50-78 50-84 51-02
1967-68 16 53-39 53-20 53-23 53-33
1968-69 17 56 03 55-73 55-73 55-73
1969-70 18 58-80 58-39 58-35 58-26
1970-71 19 61-70 61-17 61-10 60-88
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1971-72 20 64-56 64-00 64-00 63-63


1972-73 21 67-56 66-97 67-05 66-51
1973-74 22 70-69 70-08 70-24 69-51
1974-75 23 73-97 73-33 73-59 72-65
1975-76 24 77-40 76-73 77-09 75-94

Thus we can see that an increase in proportion of irrigated area under


the crop can make a significant contribution to raising the yields of
important agricultural crops.

Influence of Two Exogenous Variables


We extend the model to consider the influence of two exogenous
variables. This is done by considering the mean value of the process as a
function of two exogenous variables, say Al{t) and AV(t). /JI(t) denotes
as in the previous section, the change in proportion of irrigated area under
the crop to total area under the crop I(t) at time (t) over time (t—1).
F(t) denotes the change in amount of nitrogenous fertilizer used in kilo-
grams per hectare F(t) at time (t) over time (t—1). The mean and variance
ofX(t)are:

E[X(t)] = x0 exp (

V[X(t)] = x* exp PCbot+b^zlIj+b^/lFi)] [exp (a o t)-l]

Let us apply the extended model to the yield of wheat X(t) in con-
sideration of the proportion of irrigated area under wheat to total area
under wheat I(t) and nitrogenous fertilizer used per hectare for wheat
F(t). Under the similar assumption of P[X(0)— x0] = 1 and I(t) and F(t)
as step functions. The expressions for mean and variance of X(t) are the
following:
t t
E[X(t)] = 6-63 exp [10-2(0-2154)t+0-8108 SAIS +0-07980 ZAF{\
A LOGNORMAL DIFFUSION PROCESS APPLIED TO CROPS IN INDIA 55

V[X(t)] = (6-63)2 exp [2(10-2(0-2154)t +0-8108 ZAli +0-07980 Z AFj)]


[exp (001039t)-l]
This model gave smaller coefficients of variation which shows that
these estimates are better than those of the previous model. The positive
values 0-8108 and 0-07980 show that an increase in the proportion of
irrigated area under wheat to total area under wheat, and an increase in
the amount of nitrogenous fertilizer used per hectare both have a positive
effect on the yields of wheat.
We extrapolate the trend in the yield of wheat for the next few years
with some specific hypotheses regarding the change in the I(t) and F(t)
for wheat. Consider the following sets of hypotheses about AI(t) and
/IF(t) for wheat.
(1) A yearly increase of 0-005 in I(t) during the last three years of the
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Third Plan and of 0-9 in F(t) during the last two years of the Third Plan.
A yearly increase of 0-02 in I(t) and of 1-05 in F(t) during the Fourth
Plan period, and for the Fifth Plan period a yearly increase of 0-015 in
I(t)andof l-00inF(t).
(2) A yearly increase of 0-005 in I(t) during the last three years of the
Third Plan and of 0-9 in F(t) during the last two years of the Third Plan;
a yearly increase of 0-017 in I(t) and 1 -02 in F(t) during the Fourth Plan,
and a yearly increase of 0-015 in I(t) and 1-00 in F(t) during the Fifth
Plan period.
(3) A yearly increase of 0-006 in I(t) during the last three years of the
Third Plan and 0-9 in F(t) during the last two years of the Third Plan; a
yearly increase of 0-016 in I(t) and of 1 -04 in F(t) during the Fourth Plan
period and 0-017 in I(t) and of 1-09 in F(t) during the Fifth Plan period.
(4) A yearly increase of 0-010 in I(t) during 1963-64 to 1975-76 and
of 1 -00 in F(t) during 1964-65 to 1975-76.
The estimates for the yield per hectare of wheat based on the above
alternative hypotheses about F(t) during the period 1963-76 are shown
in Table 7.
TABLE 7
ESTIMATES FOR YIELD PER HECTARE OF WHEAT X(t) FOR 1963-64 TO 1975-76
(IN HUNDREDS OF KGS)

E[X(t)] Hypothesis No. About AI(t) and AF(t)


Year
j t-tii
I
I // III IV

1963-64 12 10-23 10-23 10-23 10-27


1964-65 13 11-06 11-06 1111 11-24
1965-66 14 11-96 11-96 1206 12-30
1966-67 15 13-24 13-18 13-31 13-46
1967-68 16 14-67 14-53 14-68 14-72
1968-69 17 16-25 1601 16-19 16-11
1969-70 18 17-99 17-65 17-86 17-63
1970-71 19 19-93 19-46 19-71 19-30
1971-72 20 21-90 21-38 21-84 21-12
1972-73 21 24-06 23-49 24-21 23-11
1973-74 22 26-44 25-81 26-84 25-29
1974-75 23 29-05 28-36 29-75 27-67
1975-76 24 31-92 31-16 32-98 30-28
56 THE JOURNAL OF DEVELOPMENT STUDIES

Thus the empirical results show that by increasing the proportion of


irrigated area under wheat to the total area under wheat and by increasing
the use of nitrogenous fertilizer for wheat, a significant increase in the
yield of wheat is accomplished.

1. M. Morishima, Equilibrium, Stability and Growth, Oxford: The Clarendon Press,


1964.
2. See, for example, works by Aitchison and Brown, Granger and Morgernstern,
Orcutt, et al., cited in the bibliography. These may be compared with cited works by
Cootner, Fisz, Lydall, Mandelbrot and Steindl.

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A LOGNORMAL DIFFUSION PROCESS APPLIED TO CROPS IN INDIA 57
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