International aggregate agricultural supply for grain and oilseed: The effects of efficiency and technological change

Abstract

This paper analyses the effects of the main determinants of international aggregate agricultural supply. We propose a new model that captures the farmers' expectations through the storage approach, instead of using Nerlove's basic model. As an innovation, we add the effects of efficiency and technological change directly, thus achieving a more powerful and informative estimation than with the usual dynamic model. Moreover, we consider the effect of climate and construct a sowing and harvesting calendar for each country and each crop to measure the supply more precisely. We also analyze the effects of agricultural prices and their volatility, of commercial policy and of changes in inventories on the suppliers' decisions. Finally, we examine the differences in these determinants depending on the level of development of the countries. [EconLit citations: Q11, Q16, Q18]. Agribusiness. 2017;33:569-585. wileyonlinelibrary.com/journal/agr c 2017 Wiley Periodicals, Inc. 569 570 LE CLECH AND FILLAT-CASTEJÓNWe have also found that the inclusion of EC and TC increases the explanatory power of the proposed model compared to the autoregressive Nerlove's model. Thus, we confirm that this autoregressive component, more than capturing the effect of expectations on prices, is absorbing the effect of the variations in the sector's productivity.Our analysis uses a large sample of representative grains and oilseeds from many countries, which required a great effort to collect and construct. Moreover, we have constructed an international sowing and harvesting calendar by crop and country, which is an essential contribution to the measurement of the aggregate agricultural supply and substantially improves the precision of the analysis. We aim to obtain a more accurate estimate of the effects of changes in fundamental factors, such as prices, economic policy, productive efficiency, and international technology change on the aggregate agricultural supply. Moreover, we study the possible different impacts in each country depending on their level of development.We obtain that both EC and TC have an important positive effect on the aggregate agricultural supply, so they should be taken into account to promote agricultural development. Regarding the effect of prices, we confirmed a low elasticity of the aggregate agricultural supply. Trade policies are effective if they use taxes over prices but they never obtain a significant effect if they use subsidies. Using a novel climate variable, we found a significant impact of adverse effects.Finally, we found that efficiency has a larger effect in highly developed countries, whereas TC is more important in countries with a lower development level.The paper is organized as follows. In Section 1, we review the main literature on the subject. In Section 2, we develop the theoretical framework. In Section 3, we describe the procedures employed to construct the sample and the variables used in the analysis. The econometric models and empirical estimation are presented in Section 4.Section 5 concludes.

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