The paradox of the supply elasticity of cotton in Mali

Abstract

ABSTRACT Many previous studies highlight that the supply elasticity of agricultural products is not always symmetric. Indeed, the main finding from the literature is that the supply of agricultural products responds more to rising prices than falling prices. However, in the context of Mali, producers seem to be particularly more sensitive to price falls and prefer to grow other crops such as maize. In this paper, we test whether the supply elasticity of cotton in Mali is asymmetric or not, and if so, characterizes the nature of the asymmetry. We apply a nonlinear Autoregressive Distributed Lag approach to the Nerlove model. Our results show that the supply elasticity of cotton is symmetric in the short-run and asymmetric in the long-run, and that cotton supply responds more to price falls than price rises in the long-run. The key finding is a paradox in the opposite direction of the asymmetry found in the literature. In the context of falling price, producers are more flexible in substituting another competitive crop for cotton, while in the case of rising prices, producers deal with insufficient access to credit and acreage, poor quality of soil and lack of equipment.