Global growing‐area elasticities of key agricultural crops estimated using dynamic heterogeneous panel methods

Abstract

We estimate the short-and long-run global response of corn, soybeans, wheat, and rice growing areas to output price changes allowing responses to vary across countries using methods from the panel time-series literature. Our estimates of growing-area response are considerably lower than estimates obtained using more traditional models. Previous findings appear biased due to the assumption of homogeneous response across countries. Our aggregate estimates of short-and long-run elasticities of four crop growing areas with respect to average price are 0.024 and 0.143, respectively. Crop-specific results indicate that both corn and soybean growing areas are generally more responsive than wheat and rice. For corn and soybeans, the long-run own-price growing-area elasticities are 0.274 and 0.793, respectively. The long-run own-price elasticities for wheat and rice are 0.279 and 0.045, respectively. The short-run own-price elasticities for corn and soybeans are 0.133 and 0.199, respectively, which are higher than wheat (0.037) and rice (0.00001).JEL classifications: O13, Q11, Q13, Q15, Q18, Q24

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