|Keywords (Extracted from title, table of contents and abstract of thesis)
supply response, agro ecological zones, punjab, agricultural growth, wheat, cotton, rice, sugarcane, stochastic trend, ground water management, irrigation, canal system, cropping pattern, cointegration, barani
Supply response has become more important and crucial research issue associated with agricultural growth in Pakistan since the introduction of a series of policy reforms in agriculture sector. Resource allocation is largely influenced by government interventions. The extent to which farmers respond to economic incentives is, therefore central concern to policy makers. This underlines the importance of study of supply response analysis from time to time to assess the impact of incentives and adopted policies on agricultural production and to understand as to what possible adjustments can be made to improve or redesign policy in the changed scenario.
The main theme of this thesis is to estimate the acreage and yield response of major crops, wheat, cotton, rice and sugarcane in different agro- ecological zones in Punjab, Pakistan using the cointegration approach. Very little research work has been conducted on supply response on agriculture using cointegration analysis in Pakistan. The traditional approach used for estimating agricultural supply response has been criticized on the ground that many time series are non-stationary and use of OLS on non-stationary time series may produce spurious regression. The previous studies of supply response in Pakistan thus, produced results which may be unreliable. Modem time series econometric technique of cointegration can be used with non-stationary data to avoid spurious regression. When combined with error correction models, it offers a means of consistent estimates of both long-run and short-run elasticities.
In this study, we examined the presence of stochastic trend (unit root) in data series. The unit root results suggested that underlying data series are most likely non-stationary. We subsequently investigated the presence of long-run relationships underlying the supply response model. The multivariate results indicated the presence of a cointegrating relationship in the supply response models. However, in some cases no cointegration could be deducted. This may of course, reflect the absence of supply response.
Inter-zonal comparison of supply response of major crops indicated different elaticities for each zone. The long-run own-price acreage and yield elasticities for wheat in cotton, rice, and mixed zones were 0.53 and 0.72, 0.46 and 0.64 and 0.49 and 0.67 respectively. In barani zone, the long-run own-price yield elasticity was 0.38. For cotton, the long-run acreage and yield elasticities were 0.55 and 1.16, and 0.46 and 0.95 in cotton and mixed zones respectively. The long-run own-price acreage elasticity for basmati in rice zone was 0.72, while the own-price yield elasticities in rice and mixed zones were 0.54 and 0.55 respectively. The long-run own-price yield elasticity for IRRI was 0.46. For sugarcane, the long-run own-price acreage and yield elasticities were 0.49 and 0.53, 0.58 and 0.51, and 0.62 and 0.56 for cotton, rice and mixed zones respectively.
The study indicated higher long-run supply elasticities than those in the short-run. This may be due to fixed factors of production like land, labor and capital in the short-run. The elasticities increase with time as factors which are fixed in the short-run become variable in the long-run. Our analysis concluded that farmers in different agro- ecological zones in Punjab are responsive to price incentives and suggested that price policy is not the sole policy instrument in guiding agricultural production and other complementary interventions to improve agricultural technology systems, irrigation and drainage system, infrastructure, input markets, access to inputs etc are equally necessary in accelerating agricultural supplies in the province.