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Estimating short-run (SR) and long-run (LR) demand elasticities of phosphate

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  • Rami Rawashdeh

    (Al-Hussein Bin Talal University)

Abstract

Many empirical exercises estimating demand functions are concerned with estimating dynamic effects of price and income changes over time. Researchers are typically interested in getting estimates of both short-run (SR) and long-run (LR) elasticities, along with their standard errors. This study aimed to contribute with estimations of demand elasticities of world phosphate fertilisers. It answered the research question “How world demand of phosphate fertilisers is affected by its own price changes, cross price changes, income changes and other variables?”. Short and long run elasticities are calculated using an economic model in this paper. The findings indicate that global phosphate demand is price inelastic both in the short and long run. In addition, in both the short and long run, income elasticity, cross price elasticity, and cross yield elasticity are inelastic. Our modeling predicts that phosphate consumption for fertilisers will increase from 45.35 million tons in 2018 to around 59.16 million tons by 2028; which implies that an average annual growth rate of 2.7% of P 2 O 5 will be required every year by phosphate consumers and that additional production capacity may be needed in order to meet this future demand. The results suggest that phosphate prices are forecast to increase, as long as demand continues to rise and no new production facilities are built.

Suggested Citation

  • Rami Rawashdeh, 2023. "Estimating short-run (SR) and long-run (LR) demand elasticities of phosphate," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 239-253, June.
    • Handle: RePEc:spr:minecn:v:36:y:2023:i:2:d:10.1007_s13563-021-00294-z
    DOI: 10.1007/s13563-021-00294-z
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