Aggregate agricultural supply response in Ethiopia: a farm‐level analysis

Abstract

Abstract This study examines the responsiveness of peasant farmers in Ethiopia to price and non‐price factors. Quadratic production and restricted profit functions are estimated using farm‐level survey data from Ethiopia in 1994. The results indicate that farmers respond only modestly to price incentives. The own‐price output supply elasticity is very low and output supply is not responsive to fertilizer prices or the wage rate. Non‐price factors are far more important in affecting production and resource use than price incentives. The results are robust to whether the primal or dual approach is used to estimate elasticities. The results underscore the need to strengthen market incentives through effective policies that will improve farmers' access to fertilizer, land and credit, public investment in roads and irrigation. Copyright © 2004 John Wiley & Sons, Ltd.