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International Supply Response

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  • Willis Peterson

Abstract

Long‐run aggregate agricultural supply elasticities obtained from conventional supply functions fitted to time series data tend to be relatively inelastic in the range of 0.1 to 0.4. I argue that these estimates substantially understate the true long‐run supply response in agriculture. Because of the lack of international input price data, implicit output/input price ratios are estimated from a production function assuming profit maximization. The estimation of an aggregate supply function utilizing these price ratios yields long run aggregate supply elasticities in the range of 0.90 to 1.19. These figures are substantially larger than those obtained from conventional supply functions fitted to time series data, but correspond closely to estimates reported in an earlier crosscountry study that used different price data for different points in time. The results imply that policies which distort domestic and/or world market prices of agricultural products cause greater output distortions in both the DCs and LDCs than are predicted by the small supply elasticities obtained from conventional supply estimation.

Suggested Citation

  • Willis Peterson, 1988. "International Supply Response," Agricultural Economics, International Association of Agricultural Economists, vol. 2(4), pages 365-374, December.
    • Handle: RePEc:bla:agecon:v:2:y:1988:i:4:p:365-374
    DOI: 10.1111/j.1574-0862.1988.tb00065.x
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    Cited by:

    1. Fertő, Imre, 1996. "A mezőgazdaság a piacgazdaságban [Agriculture in a market economy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 114-127.
    2. Hertel, Thomas W., 1991. "Applied General Equilibrium Analysis of Agricultural Policies," Staff Papers 200396, Purdue University, Department of Agricultural Economics.
    3. Yerushalmi, Erez, 2012. "Measuring the administrative water allocation mechanism and agricultural amenities," Economic Research Papers 270633, University of Warwick - Department of Economics.
    4. Craig, Barbara J. & Pardey, Philip G. & Roseboom, Johannes, 1994. "International Agricultural Productivity Patterns," Working Papers 14470, University of Minnesota, Center for International Food and Agricultural Policy.
    5. John T. Saunders & Marcel Adenäuer & Jonathan Brooks, 2019. "Analysis of long-term challenges for agricultural markets," OECD Food, Agriculture and Fisheries Papers 131, OECD Publishing.
    6. Wyatt Thompson & Joe Dewbre & Patrick Westfhoff & Kateryna Schroeder & Simone Pieralli & Ignacio Perez Dominguez, 2017. "Introducing medium-and long-term productivity responses in Aglink-Cosimo," JRC Research Reports JRC105738, Joint Research Centre.
    7. Macours, Karen & Swinnen, Johan F. M., 2000. "Causes of Output Decline in Economic Transition: The Case of Central and Eastern European Agriculture," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 172-206, March.
    8. Thompson, Wyatt & Dewbre, Joe & Pieralli, Simone & Schroeder, Kateryna & Pérez Domínguez, Ignacio & Westhoff, Patrick, 2019. "Long-term crop productivity response and its interaction with cereal markets and energy prices," Food Policy, Elsevier, vol. 84(C), pages 1-9.

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