Supply response of peasant farmers in Ethiopia : a farm, level profit functions analysis

This study assesses the responsiveness of peas ant farmers to price and non-price factors using a farm-level survey data from Ethiopia, and the extent to which responsiveness varies with agro-ecology and farming systems. Agro-climatic and farming system differences are explicitly taken into account by estimating the Northern and Central highlands of the grain-plough, as well as the Southern enset-hoe, systems separately. Peasant farmers in Ethiopia respond positively and significantly to price incentives, and responsiveness to prices is far greater in the more climatically favoured and commercially oriented regions of the Central and Southern highlands. This suggests that agro-climatic and farming system differences need to be taken into account in designing and implementing agricultural policy. Some important differences are also observed in the relative importance of non-price variables across zones, although the difference is not generally large compared to the effects of prices. The results underscore the need to strengthen market incentives through effective policies that will improve farmer's access to better quality land, credit and inputs, and public investment in roads and irrigation. Even more so in the Northern highlands wh ere these factors are far more important in affecting production and resource use than price incentives.