Aggregate Agricultural Supply Response in Developing Countries: A Survey of Selected Issues

32 Pages Posted: 20 Apr 2016

See all articles by Maurice Schiff

Maurice Schiff

Fellow, Institute for the Study of Labor (IZA)

Claudio E. Montenegro

World Bank Group; Universidad de Chile, Economics Department

Date Written: July 1995

Abstract

Time series estimates can provide an accurate picture of past behavioral relations, but they are not an adequate basis for forecasting the impact of policy reform. They typically generate a downward-biased estimate of the response to a credible reform.

Schiff and Montenegro review several studies of the aggregate agricultural supply response.

Using both economic and econometric reasons, they argue that time series estimation typically generates a downward-biased estimate of the response to a credible reform.

Even though time series estimates can provide an accurate picture of past behavioral relations, they do not provide an adequate basis for forecasting the impact of policy reform. This is especially true in developing countries, where policy reforms involve large changes and have included agricultural price reform, industrial trade liberalization, financial sector reform, and macroeconomic stabilization.

Under those circumstances, parameter values obtained under the former policy regime have little relevance in the new regime.

Schiff and Montenegro also argue that investments in public goods should be viewed as complementary to, not competitive with, price policy.

They claim that to select the policy with the biggest impact on output makes no sense. They provide what they consider to be better criteria for choosing the best from alternative policies.

This paper - a product of the International Trade Division, International Economics Department - is part of a larger effort in the department to understand the impact of policy reforms.

Suggested Citation

Schiff, Maurice W. and Montenegro, Claudio E., Aggregate Agricultural Supply Response in Developing Countries: A Survey of Selected Issues (July 1995). Available at SSRN: https://ssrn.com/abstract=620677

Maurice W. Schiff (Contact Author)

Fellow, Institute for the Study of Labor (IZA) ( email )

Bonn
Germany

Claudio E. Montenegro

World Bank Group ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Universidad de Chile, Economics Department

Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile

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