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, which reflect respectively, long and short-terms production (or farming) decision variables for rice supply in West Africa. Using pooled time series cum panel data from seven countries covering 1991-2006 from the region, the study employed panel cointegration estimator such as FMOLS and DOLS for the long-run supply elasticities and one-step Blundell-Bond system GMM for the estimation of the short-run elasticities. While the empirical findings from both estimators provide similar results, the estimates show that any increase in price of maize decreased significantly rice yield in the long run. In contrast, the estimates also show that any increase in price of maize and cassava increased significantly rice acreage in the long run. The short-run estimates show that rice yield (acreage) increased (decreased) significantly w.r.t price of maize in the study. Short-run Granger causality runs only from maize price, while long run causality of joint effect of the prices to both the yield and acreage supply is also evident in the study. Our results also find that rice yield and acreage supply function are unresponsive to own price in both the short and long run. Given this, one may thus argue that not much can be expected from change in price alone as package of changes including investment in non-price factors such as irrigation, and technology transfer among others may play a significant role in inducing rice supply response in the region.