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Supply Response and Investments in Agriculture in Andhra Pradesh

Author

Listed:
  • Pandey, Lalmani
  • Rao, P. Parthasarathy
  • Birthal, P. S.
  • Bantilan, M. C. S.
  • Binswanger, Hans P.

Abstract

The present study explores the response of aggregate farm output, input use and farm investment decisions to output and input prices, wages, technological change, public investments, and climate factors. The study is based on district level panel data from Andhra Pradesh over 39 years. This study confirms the low short run aggregate output supply elasticity of Indian agriculture found in earlier studies. It also accepts the hypothesis that the relationship between public investment, financial institutions and farm investment of labor and capital in agriculture have not changed over the years. The empirical estimates of aggregate output supply elasticity with respect to output price (0.2), road (0.2), market (0.11), and net irrigated area (0.05) are higher than findings of study for selected states in India by Binswanger et al (1993). Aggregate agricultural output responds positively with banks and canal irrigation each with elasticity 0.01. The elasticity of wage (0.3) on aggregate output is higher than price elasticity (0.2) indicating effects of rising wages outweigh the incentives offered by output price support. Climate factor such as rainfall affect fertilizer use and aggregate output significantly. The study substantiates the findings of Binswanger et al (1993) that public investment in infrastructure and financial institutions respond to agriculture potential and agro-climatic endowments of districts.

Suggested Citation

  • Pandey, Lalmani & Rao, P. Parthasarathy & Birthal, P. S. & Bantilan, M. C. S. & Binswanger, Hans P., "undated". "Supply Response and Investments in Agriculture in Andhra Pradesh," 2011 ASAE 7th International Conference, October 13-15, Hanoi, Vietnam 290430, Asian Society of Agricultural Economists (ASAE).
    • Handle: RePEc:ags:asae11:290430
    DOI: 10.22004/ag.econ.290430
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    References listed on IDEAS

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    1. Binswanger, Hans & Yang, Maw-Cheng & Bowers, Alan & Mundlak, Yair, 1987. "On the determinants of cross-country aggregate agricultural supply," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 111-131.
    2. Binswanger, Hans P. & Khandker, Shahidur R. & Rosenzweig, Mark R., 1993. "How infrastructure and financial institutions affect agricultural output and investment in India," Journal of Development Economics, Elsevier, vol. 41(2), pages 337-366, August.
    3. McGuirk, Anya & Mundlak, Yair, 1991. "Incentives and constraints in the transformation of Punjab agriculture," Research reports 87, International Food Policy Research Institute (IFPRI).
    4. Mundlak, Yair, 1985. "The Aggregate Agricultural Supply," Working Papers 232646, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    5. Lau, Lawrence J. & Yotopoulos, Pan A., 1989. "The meta-production function approach to technological change in world agriculture," Journal of Development Economics, Elsevier, vol. 31(2), pages 241-269, October.
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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