On the determinants of cross-country aggregate agricultural supply

The nature of supply response is a subject often encountered in evaluating the effects of economic policies. The concept of supply response concentrates on the output-price relationships. The purpose of this paper is to analyze the effects of price and various public inputs, or shifters, on the aggregate agricultural supply. The sample consists of annual observations for 58 countries for the period 1969-1978. This paper summarizes some of the findings which are reported in greater detail in Binswanger et al. The study has several major findings. l) A weak positive supply response is obtained from the variations over time for the individual countries. 2) An implausible negative supply response is obtained from the between-country variations. 3) The shifters, as a group, account for most of the variations in supply in the within-country and between-country analysis. Does it mean that prices have no role in the determination of supply? The answer is no but the role is somewhat more difficult to detect. The paper indicates that the within-country estimates measure the short-run response and as such the paper's estimates are consistent with estimates obtained from similar data using for the agricultural production function.