Determinants of Agricultural Commodity Market Supply

Abstract

This study was initiated to achieve the specific objectives as identification of factors that affect market participation decision of households and determination of factors that determine the volume of market supply of pepper. In order to acquire the relevant data, formal and informal methods of data collection were accomplished. To differentiate factors affecting the market participation and the amount of pepper sold, the Heckman Two- Stage econometric model was employed. The outcome equation result revealed that market participation decision of households and amount of pepper sold were significantly affected by many of the variables hypothesized to have impact on the explained variable. In order to settle price fluctuations and to strengthen the bargaining power of producers, there should be a well stated commodity standard that is set at the national level. Furthermore, market competitiveness, structure and efficiency can be improved through facilitating training regarding pepper trading as it help producers and other interested bodies better involve in the commodity market.

Keywords: Heckman two stage model, Inverse Mill’s Ratio, Outcome equation