Supply response of Zimbabwean agriculture: 1970–1999

This paper uses data that spans different pricing regimes to estimate the aggregateagricultural supply response to price and non-price factors in Zimbabwe. Theautoregressive distributed lag (ARDL) approach to cointegration employed here givesconsistent estimates of supply response in the presence of regressor endogeneity and alsopermits the estimation of distinct estimates of both long-run and short-run elasticitieswhen exogenous variables are not integrated of the same order. The results confirm thatagricultural prices in Zimbabwe are endogenous and the exogenous variables are notintegrated of the same order hence use of the autoregressive distributed lag approach wasworthwhile. The paper finds a long-run price elasticity of 0.18, confirming findings in theliterature that aggregate agricultural supply response to price is inelastic. This resultmeans that the agricultural price policy is a somewhat blunt instrument for effectinggrowth in aggregate agricultural supply. The provision of non-price incentives must playa key role in reviving the agricultural sector in Zimbabwe.