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Vector error correction modelling of Nigerian agricultural supply response

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  • Olubode-Awosola, O.O.
  • Oyewumi, Olubukola Ayodeju
  • Jooste, Andre
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    Abstract

    Undue taxing of the agriculture sector could constitute a disincentive to agricultural production in most low-income African countries where agriculture is being taxed for industrial development. There is an argument that the high level of taxation of agriculture in favour of industrialization is in part due to the underestimation of the supply response of the agricultural sector. This study tests the theoretical hypotheses that only price, non-price and natural disincentives respectively pose problems for agricultural growth. JohansenÂ’s approach to co-integration analysis was employed to test these hypotheses using the time-series data from the Central Bank of Nigeria (CBN) statistical database. The long-run price elasticity of supply is 0.13 and capital shift supply 18 per cent. The implication of this is that much more in-depth research is needed to identify those factors that affect supply and to describe the effect of factors that shift supply in response to price incentives. This could provide valuable information for government in the use of appropriate policy measures and variables.

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    Bibliographic Info

    Article provided by Agricultural Economics Association of South Africa (AEASA) in its journal Agrekon.

    Volume (Year): 45 (2006)
    Issue (Month): 4 (December)
    Pages:

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    Handle: RePEc:ags:agreko:10141

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    Web page: http://www.aeasa.org.za/
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    Keywords: Agribusiness;

    References

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    1. Cardenas, Mauricio, 1994. "Stabilization and redistribution of coffee revenues: A political economy model of commodity marketing boards," Journal of Development Economics, Elsevier, vol. 44(2), pages 351-380, August.
    2. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
    3. Rainer Thiele, 2003. "Price Incentives, Non‐price Factors and Agricultural Production in Sub‐Saharan Africa: A Cointegration Analysis," African Development Review, African Development Bank, vol. 15(2‐3), pages 425-438.
    4. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
    5. Rainer Thiele, 2000. "Estimating the Aggregate Agricultural Supply Response: A Survey of Techniques and Results for Developing Countries," Kiel Working Papers 1016, Kiel Institute for the World Economy.
    6. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-77, August.
    7. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
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    Cited by:
    1. Johnson, Michael E. & Takeshima, Hiroyuki & Gyimah-Brempong, Kwabena, 2013. "Assessing the potential and policy alternatives for achieving rice competitiveness and growth in Nigeria:," IFPRI discussion papers 1301, International Food Policy Research Institute (IFPRI).

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