This paper uses data spanning different pricing regimes to estimate the aggregate agricultural supply response to price and non-price factors in Zimbabwe.
The autoregressive distributed lag (ARDL) approach to cointegration employed here gives consistent estimates of supply response in the presence of regressor endogeneity and also permits the estimation of distinct estimates of both long-run and short-run elasticities when exogenous variables are not integrated of the same order. The results confirm that agricultural prices in Zimbabwe are endogenous and the exogenous variables are not integrated of the same order hence use of the autoregressive distributed lag approach was worthwhile. The paper finds a long-run price elasticity of 0.18, confirming findings in the literature that aggregate agricultural supply response to price is inelastic. This result means that the agricultural price policy is a somewhat blunt instrument for effecting growth in aggregate agricultural supply. The provision of non-price incentives must play a key role in reviving the agricultural sector in Zimbabwe.
