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Relative Profitability, Supply Shifters and Dynamic Output Response:The Indian Foodgrains

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  • SUNIL KANWAR

    (Delhi School of Economics)

Abstract

The realisation that the wage-goods constraint, if binding, could stall the growth process of a developing country, prompted policy makers to encourage agriculture by various means. The success of public policy depends, however, on how strongly farmers respond to the incentives provided. Using a large panel dataset pertaining to Indian agriculture - spanning the period 1967-68/1999-00, and covering the 6 important food crops cultivated across 16 major states - we provide estimates of area, yield and output elasticities w.r.t price and nonprice factors. We find consistent evidence, that the supply response of food crops is influenced by rainfall, input availability (specifically irrigation, fertilizer and improved seeds), and relative profits, in that order of importance. Our results prompt us to conclude, that all things considered, the preferred policy should be to encourage irrigation, fertilizer use and the use of modern seeds, rather than raise output support/procurement prices period after period.

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Bibliographic Info

Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 133.

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Length: 38 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:cde:cdewps:133

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Keywords: wage-goods; price incentives; supply shifters;

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  1. Nerlove, Marc & Fornari, Ilaria, 1998. "Quasi-rational expectations, an alternative to fully rational expectations: An application to US beef cattle supply," Journal of Econometrics, Elsevier, Elsevier, vol. 83(1-2), pages 129-161.
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  3. Holt, Matthew T., 1999. "A Linear Approximate Acreage Allocation Model," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 24(02), December.
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  6. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
  7. Nerlove, Marc & Bessler, David A., 2001. "Expectations, information and dynamics," Handbook of Agricultural Economics, Elsevier, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 3, pages 155-206 Elsevier.
  8. Marc Nerlove, 1979. "The Dynamics of Supply: Retrospect and Prospect," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 394, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Rosegrant, Mark W. & Kasryno, Faisal & Perez, Nicostrato D., 1998. "Output response to prices and public investment in agriculture: Indonesian food crops," Journal of Development Economics, Elsevier, Elsevier, vol. 55(2), pages 333-352, April.
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Cited by:
  1. Maximilian Auffhammer & V. Ramanathan & Jeffrey Vincent, 2012. "Climate change, the monsoon, and rice yield in India," Climatic Change, Springer, Springer, vol. 111(2), pages 411-424, March.

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