Supply Response of Haricot bean: The Case of Southern Ethiopia

Abstract

Even though Ethiopia had undertaken different policy measures since 1991 to boost agricultural production and increase the spillover effects of agriculture, there is no available study done to know the effects of such policies. This study aimed to fill this gap by analyzing the supply response of the commodity chosen haricot bean in Sidama Zone of Southern Ethiopia. The study applies the modified Nerlovian model and uses price data and non price data from 1991-2012.The result of the estimates of the time series data shows that acreage is positively and significantly influenced by change in its own price in the long run. Acreage and yield are highly influenced by price and non price factors both in the long run and short run. Generally farmers respond to price incentives by reallocating land and increase yield. The error correction term shows that deviation of acreage from the equilibrium corrected in the current period and it takes less than five years to come to the equilibrium. On the other hand any deviation of yield from the equilibrium corrected in the current period and takes less than two years to come to the equilibrium. The empirical results illustrate that there is still great potential to increase production through improvement of price and non price inputs. Hence the ongoing measures should be directed towards assuring appropriate remunerative prices and increase investment and supply of other non price factors like, increase investment in irrigation.

Keywords: Supply Response, Long Run Response, Short Run Response, Equilibrium, Error Correction Model