Agricultural Supply Response Research Articles

Labor markets: A critical link between global-local shocks and their impact on agriculture

Labor markets can shape the impacts of global market developments and local sustainability policies on agricultural outcomes, including changes in production and land use. Yet local labor market outcomes, including agricultural employment, migration and wages, are often overlooked in integrated assessment models (IAMs). The relevance of labor markets has become more important in recent decades, with evidence of diminished labor mobility in the United States (US) and other developed countries. We use the SIMPLE-G (Simplified International Model of agricultural Prices, Land use, and the Environment) modeling framework to investigate the impacts of a global commodity price shock and a local sustainable groundwater use policy in the US. SIMPLE-G is a multi-scale framework designed to allow for integration of economic and biophysical determinants of sustainability, using fine-scale geospatial data and parameters. We use this framework to compare the impacts of the two sets of shocks under two contrasting assumptions: perfect mobility of agricultural labor, as generally implicit in global IAMs, and relatively inelastic labor mobility (‘sticky’ agricultural labor supply response). We supplement the numerical simulations with analytical results from a stylized two-input model to provide further insights into the impacts of local and global shocks on agricultural labor, crop production and resource use. Findings illustrate the key role that labor mobility plays in shaping both local and global agricultural and environmental outcomes. In the perfect labor mobility scenario, the impact of a commodity price boom on crop production, employment and land-use is overestimated compared with the restricted labor mobility case. In the case of the groundwater sustainability policy, the perfect labor mobility scenario overestimates the reduction in crop production and employment in directly targeted grids as well as spillover effects that increase employment in other grids. For both shocks, impacts on agricultural wages are completely overlooked if we ignore rigidities in agricultural labor markets.

Reverse Dutch disease with trade costs: Prospects for agriculture in Africa's oil-rich economies

Reduced oil revenues since 2014 are stimulating tradable sectors in oil-exporting countries. I use an open economy model with internal and external trade costs to investigate the prospects for reverse Dutch disease in African countries with a comparative advantage in agriculture. While falling resource revenues lead factors of production to shift into agriculture, remote farmers can lose when trade costs make agricultural goods behave like non-tradables. Household survey data from Nigeria show a significant agricultural supply response that is correlated with exposure to international markets. Lowering trade costs and boosting agricultural productivity can help offset the lost income from oil.

Agricultural supply response and price risk of maize and sorghum in South Africa

The study used the Autoregressive Distributed Lag-Error Correction Model (ARDL-ECM) approach to estimate the responsiveness of South African maize and sorghum producers to price risk, price incentives and non-price incentives. The price risk variable was incorporated in the supply models to examine its impact on maize and sorghum production decisions. The study used annual historical time series data of 49 observations for the period 1970 to 2018 was used in the analysis. The empirical results reveal that maize and sorghum producers' response to own price is reasonably low. The study further shows that both maize and sorghum crops demonstrate a high speed of adjustment to the long-run equilibrium, which means that in the event of a shock to the system, grain output will quickly re-establish itself at a faster rate. The findings underscore the relevance of price risk in determining production output in South Africa.

Climate changes and new productive dynamics in the global wine sector

Climate change has the potential to impact the agricultural sector and the wine sector in particular. The impacts of climate change are likely to differ across producing regions of wine. Future climate scenarios may push some regions into climatic regimes favourable to grape growing and wine production, with potential changes in areas planted with vines. We examine which is the linkage between climate change and productivity levels in the global wine sector. Within the framework of agricultural supply response, we assume that grapevines acreage and yield are a function of climate change. We find that grapevines yield suffers from higher temperatures during summer, whereas precipitations have a varying impact on grapevines depending on the cycle of grapevines. Differently, acreage share of grapevines tends to be favoured by higher annual temperatures, whereas greater annual precipitations tend to be detrimental. The impacts vary between Old World Producers and New World Producers, also due to heterogeneity in climate between them.

Aggregate Supply Response in Algerian Agriculture: The Error Correction Model Applied to Selected Crops

This paper examines aggregate supply response of 19 selected crops in Algerian agriculture during the 1966-2018 period by employing cointegration analysis and error correction model (ECM). It tests whether there has been a long-run equilibrium relationship between agricultural outputs and prices, besides a confirmation about the responsiveness of agricultural supply to economic incentives (prices). Findings indicate that the long-run elasticities of all selected crops with respect to prices are statistically significant and mostly low, whereas short-run elasticities are lower, which appeals to the adequacy of adjustment to economic incentives. Furthermore, the results of the ECM confirmed the positive responsiveness to prices with differential rates of adjustment for selected crops, ruling out the applicability of a presumed perverse supply response in Algerian agriculture.

Agricultural supply response for sunflower in South Africa (1947–2016): The partial Nerlovian framework approach

The study estimates sunflower supply response in South Africa using time series data from 1947 to 2016, modelled through the Nerlovian Partial Adjustment approach. Short- and long-run price elasticities of 0.238 and 0.313 respectively, suggest that farmers do not easily adjust acreage devoted to sunflower given price changes, indicating the influence of other non-price factors. An adjustment coefficient of 0.272 indicates that the time taken to adjust from the actual to the desired acreage level is slow, at 27% per year. The estimated elasticities provide some scope for using price and non-price incentives to influence sunflower production in the long-run. This could facilitate decision-making by sunflower producers to spearhead internal and external adjustment processes. The study contributes to a growing body of literature on agricultural supply response determinants, thus providing evidence-based macro-economic tools towards agricultural policy-making and reform process.

Seasonal rural labor markets and their relevance to policy analyses in developing countries

Seasonality is a salient feature of rural livelihoods and particularly within agriculture the demand for labor varies with the seasons and weather. In low-income countries, agriculture employs almost two-thirds of the labor force and incomes from labor are a major determinant of welfare. Therefore, an appropriate model representation of rural labor markets is critical when analyzing agricultural and food policies. Economy-wide models are commonly used for ex-ante policy analysis, but have so far ignored the influence of seasonality, implicitly assuming separability of seasonal labor demand and supply. This study relaxes that assumption using a computable general equilibrium (CGE) model calibrated to the Bhutanese economy as an illustrative case. Using model setups with and without seasonal labor markets, a cereal export ban of India is simulated leading to higher import prices for Bhutan. Results demonstrate that neglecting the influence of seasons on rural labor markets systematically biases model results. Assuming homogeneity of labor units, i.e., allowing substitution across seasons, understates the impacts of policy changes on rural wage rates, distorts households' labor-leisure trade-off decisions and overstates agricultural supply response. Given the widespread use of economy-wide models, the results are important for understanding the implications of domestic and global policy changes for agriculture and welfare in developing economies.

Climate, Agroecology and Socio-Economic Determinants of Food Availability from Agriculture in Bangladesh, (1948–2008)

The paper examines the impacts of prices, resources, technology, education, public investments, climatic variables and agroecology on Food Availability (FA) from domestic agriculture in Bangladesh using a panel data of 17 regions covering a 61-year period (1948–2008) by utilising a dynamic agricultural supply response framework and Generalised Methods of Moments (GMM) estimator. Results revealed that FA has increased at the rate of 1.32% p.a. with significant regional variations. Significant regional differences exist with respect to climatic variables, resources, Green Revolution (GR) technology and education. Among the output prices, rise in the prices of rice, vegetables and pulses significantly increase FA whereas an increase in spice price significantly reduces FA. Among the input prices, a rise in labour wage significantly increases FA. FA increases significantly with an increase in GR technology expansion, as expected. Among the resources, increases in average farm size and labour stock per farm significantly increase FA, as expected. Among the climatic factors, a rise in annual minimum temperature significantly increases FA. FA is also significantly influenced by agroecological characteristics. FA is significantly higher in Karatoa floodplain and Atrai Basin but significantly lower in Ganges Tidal floodplain. Major disasters/events (i.e., the Liberation War of 1971 and 1988 flood) also significantly reduced FA, as expected. The key conclusion is that, over the past six decades, Food Availability in Bangladesh was significantly shaped by changes in climate, agrocology, output prices, resources and GR technology diffusion.

Modelling Supply Response and Investment in Agriculture in Developing Countries - A View from the Cloister

Modeling aggregate supply response of agriculture in developing economies may be effectively pursued both at micro and meso-levels in a profit maximizing framework, choice of technique and household decision theoretical system of neo-classical tradition. The system of equations consisting of aggregate output supply, input demand, and private investment functions can be estimated taking into account of imperfections in land, labor, capital and public infrastructure and market access across ago-ecosystems and production systems.

Extensive and Intensive Agricultural Supply Response

Interest in agricultural supply response increased dramatically after model predictions of land use change were used to estimate biofuel greenhouse gas emissions. The models divide crop response into higher yield—the intensive margin—or more land—the extensive margin. Input adjustments are assumed to drive yield response. But most yield changes result from adoption of technology. Regulators and modelers assume that increased harvested area implies conversion of land from forest or pasture to crops. With the notable exception of African countries, recent expansion of harvested area is due to more intensive use of existing agricultural land through multiple cropping and technology improvement. A lack of response at the extensive margin is consistent with inelastic estimates of land use change estimated by using time-series data. Option value is one reason for this inelastic response. Predictions of land use change based on cross-section data imply much higher land use elasticities than are consistent with recent data.

A panel cointegration analysis and dynamic causality test of agricultural supply response to prices: The case of rice in West Africa

The paper provides a regional estimate of rice yield and acreage supply response to prices in West Africa. Using balanced panel data of seven countries covering 1991–2006, the study employs panel cointegration estimators, namely FMOLS and DOLS to estimate the long-run rice yield supply function and using one-step Blundell-Bond system GMM to estimate the short-run acreage supply function in the region. While the empirical findings from both estimators provide similar results, the estimates show that price of maize is a key determinant of rice yield and acreage and there is rice-maize substitutability in both the long-run and short-run in the study. The short-run Granger causality runs only from maize price to rice acreage, while long run causality of joint effect of the prices on the acreage supply is also evident in the study. Our results also show that the rice yield and acreage supply functions are unresponsive to own price in the short -run and long -run, respectively.

Food Prices and Poverty Reduction in the Long Run

Standard microeconomic methods consistently suggest that, in the short run, higher food prices increase poverty in developing countries. In contrast, macroeconomic models that allow for an agricultural supply response and consequent wage adjustments suggest that the poor ultimately benefit from higher food prices. In this paper we use international data to systematically test the relationship between changes in domestic food prices and changes in poverty. We find robust evidence that in the long run (one to five years) higher food prices reduce poverty and inequality. The magnitudes of these effects vary across specifications and are not precisely estimated, but they are large enough to suggest that the recent increase in global food prices has significantly accelerated the rate of global poverty reduction. The policy implications of these findings are therefore nuanced: short-run social protection is justified in the face of high food price volatility, but passing on higher prices to producers in the long run is an important means of reducing poverty in the poorest countries.

Aggregate Agricultural Output Supply Response in Akwa Ibom State of Nigeria: An Application of the Nerlovian Adjustment Model

Aggregate Agricultural Output Supply Response in Akwa Ibom State of Nigeria: An Application of the Nerlovian Adjustment Model

Aggregate Agricultural Output Supply Response in Akwa Ibom State of Nigeria: An Application of the Nerlovian Adjustment Model

A large number of economists have concentrated their efforts on the study of the supply response of the crop sub-sector and individual crops to price and non-price incentives, but studies on aggregate supply response are few. This study is necessary in that it would assist policy makers to identify and evaluate the key variables which are important in determining aggregate agricultural output supply. The Nerlovian adjustment model was used for the estimation. The estimated coefficient were very low, indicating weak or minimal contributions of the variables to output growth in Akwa Ibom State. Moreover, the estimated short-run and long-run elasticities were fairly inelastic. However, the adjustment coefficient which measures the speed and magnitude of changes in planned output in response to anticipated output was above average. What this portrays is that farmers in Akwa Ibom State were more responsive to policy incentives. More of these factors should be committed to agricultural production, so as to improve productivity.

Prices and production: agricultural supply response in fourteenth‐century England

This article challenges the growing consensus in the literature that medieval manorial managers were price responsive in their production decisions. Using prices of and acreages planted with wheat, barley, and oats on manors held by the bishop of Winchester from 1325 to 1370, price elasticities of supply are estimated for each grain in aggregate and on each particular manor. Aggregate price elasticities of supply for wheat, barley, and oats were rarely statistically significant and when significant were very low compared with elasticities estimated for developing and developed countries in the nineteenth and twentieth centuries. The low levels of agricultural supply response in fourteenth‐century England suggest that commercialization was not as dominant in the medieval economy as has been argued. Thus, structural changes in the economy, such as the leasing of demesnes, the growth of wage labour, and the end of villeinage, may have been more important than price fluctuations in driving long‐run economic change after the Black Death. Likewise, a shift from low price responsiveness to higher price responsiveness could have been an important part of the capitalist transformation of agriculture in the early modern period.

Supply Response and Investment in Agriculture in Andhra Pradesh

The study explored the response of aggregate farm output, input use, and farm investment decisions to output and input prices, wages, technological change, public investments, and climatic factors using district-level panel data of over 39 years from Andhra Pradesh. It confirms the low, short-run aggregate output supply elasticity of Indian agriculture as found in the literature. It validates the hypothesis that the relationships between public investment, financial institutions, and farm investment of labor and capital in agriculture have not changed over the years. The empirical estimates of aggregate output supply elasticity with respect to output price (0.2), roads (0.2), markets (0.11), and net irrigated area (0.05) are higher than previous findings for selected states in India. Aggregate agricultural output responds positively to credit availability (represented by banks) and canal irrigation, each with an elasticity of 0.01. The wage elasticity (0.3) on aggregate output is higher than price elasticity (0.2), indicating that the effects of rising wages outweigh the incentives offered by output price support. Climatic factors (e.g., rainfall) significantly affect fertilizer use and aggregate output while deviation from normal rainfall adversely affects aggregate output. The study substantiates previous findings that public investment in infrastructure and financial institutions respond to the agriculture potential and agro-climatic endowments of an area. A renewed focus, therefore, is required for better targeting of public investments in areas that are relatively resource poor and have harsh agro-climatic conditions for a more inclusive growth and rural poverty reduction.

Modeling Agricultural Supply Response Using Mathematical Programming and Crop Mixes

Mathematical programming models are widely used in agricultural sector analysis. However, the lack of micro‐level data, as well as computational requirements, necessitate the aggregation of individual producers into representative units when working at the sectoral level. This usually leads to unrealistic extreme specialization in supply responses. In 1982, McCarl introduced the “historical crop mixes” approach to avoid extreme specialization. We extend this approach by generating additional synthetic crop mixes using supply response elasticities and systematically varied commodity prices. In addition to avoiding extreme specialization, this approach provides flexibility when future supply responses can be vastly different from past responses. An application to U.S. biofuel policy analysis is presented.

Agricultural Extension, Transactions Costs, and Supply Response: Discussion

American Journal of Agricultural EconomicsVolume 94, Issue 2 p. 393-394 ASSA Meeting Invited Paper Session Agricultural Extension, Transactions Costs, and Supply Response: Discussion Xiaobo Zhang, Corresponding Author Xiaobo Zhang [email protected] International Food Policy Research Institute[email protected]Search for more papers by this author Xiaobo Zhang, Corresponding Author Xiaobo Zhang [email protected] International Food Policy Research Institute[email protected]Search for more papers by this author First published: 25 October 2011 https://doi.org/10.1093/ajae/aar115Citations: 1 This article was presented in an invited paper session at the 2011 ASSA annual meeting in Denver, CO. The articles in these sessions are not subjected to the journal's standard refereeing process. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL No abstract is available for this article.Citing Literature Volume94, Issue2January 2012Pages 393-394 RelatedInformation

Dynamic Agricultural Supply Response Under Economic Transformation: A Case Study of Henan, China

During the dramatic economic transformation in the last few decades, food demand in China has expanded due to rapid urbanization, dietary change, and steady population growth. At the same time, a decline in available land for agriculture has made grain selfsufficiency,a major goal of Chinese agriculture policy, a considerable challenge. The governmenthasimplementedcomprehensivepolicies to encourage domestic agricultural production, including eliminating agricultural taxes and providing direct subsidies to farmers. It remains unclear whether these policies are effective in stimulating food production.There isanurgentneedforknowledgeonagricultural supply response to changes in prices, policies and rural infrastructure in China, which can guide policy formulation in the process of economic transformation. If agriculture is highly responsive,policy-induced changes in farmers’ behavior can be effective in increasing production and ensuring long-term food security in the country.

The price of protein

The paper examines micro-level price dynamics of the major dietary sources of protein in India, based on demand-supply fundamentals. As levels of affluence increase, the demand for proteins increases. But some categories show a long-term decline in availability, others show volatile growth due to structural imbalance between demand and supply, raising the prospect of price surges. Persistent price increases in commodities for which there are no effective substitutes raise wages and the potential rate of inflation over a period of time, warranting a monetary tightening. To the extent diets are affected human resources are weakened. Improving the agricultural supply response is urgent.