Estimating the supply response of cotton and cereal crops in smallholder production systems: recent evidence from Mali

Abstract

AbstractCotton is one of the most important crops in West Africa and is a major catalyst of economic development in rural areas, but the sector has suffered from a decline in the world cotton price after 1999. This article exploits an unusual data set following 82 farmers over 14 years, from 1994 through 2007, to estimate a Nerlovian supply response model for cotton, maize, sorghum, and millet in long‐term rotation. The resulting system of equations is estimated with two‐stage least squares (2SLS), showing that this sample of Malian cotton producers have responded to prices in a relatively inelastic manner, with supply elasticities only about one‐half of those estimated for producers in developed countries. Policy reforms could help producers respond more easily to prices changes, as well as to raise average productivity levels.