Masters Degrees (Agricultural Economics)
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Browsing Masters Degrees (Agricultural Economics) by Subject "Agriculture -- Economic aspects -- South Africa"
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Item Open Access Econometric estimation of Armington elasticities for selected agricultural products in South Africa(University of the Free State, 2007-11) Ogundeji, Abiodun Akintunde; Jooste, A.English: The economic evaluation of, for example, trade liberalisation requires complex models that can take different forms and which are based on economic theory. Of particular importance in partial and general equilibrium models is the behavioural function that governs the interactions between different variables. For example, in these models changes in trade regimes and tariffs alter the domestic price of imported goods relative to that of domestically produced goods, and such changes in relative prices affect the fraction of the demand supplied by imports. If such behaviour is not modelled correctly, trade impacts can be either under- or overestimated. Estimates of the elasticity of substitution between goods differentiated by their place of origin are therefore required. A review of the literature revealed that estimates of Armington elasticities are not available for agricultural products in the majority of countries, including South Africa, in spite of the importance of including Armington elasticities when evaluating the impact of trade policies. The focus of this study was on the estimation of Armington elasticities for selected agricultural products in South Africa. In this study, non-nested CES Armington elasticities were estimated using the econometric approach for the following agricultural products: Meat of bovine animals (fresh or chilled); meat of bovine animals (frozen); meat of swine (fresh, chilled or frozen); maize or corn; wheat and meslin; soybeans (broken or not broken); and sunflower seeds (broken or not broken). Three econometric models, namely geometric lag, single-equation error correction, and ordinary least square, were estimated based on the time series properties of the data. All the products considered in this study have significant Armington elasticities at 10 percent level of significance. All the products except soybeans have short and long-run elasticities. The estimates of Armington elasticities range between 0.60 and 3.31 for the short-run elasticities, and between 0.73 and 3.21 for the long-run elasticities. These values suggest that imported and domestic agricultural products are not perfect substitutes. The long-run elasticity estimates show that meat of bovine animals (frozen) is the most import sensitive product followed by maize, meat of bovine animals (fresh or chilled) and sunflower seeds, while wheat and meat of swine (fresh, chilled or frozen) are the least import-sensitive products. The short-run elasticities show that soybeans is the most import-sensitive product followed by meat of bovine animals (fresh or chilled), while meat of swine (fresh, chilled or frozen) is the least import-sensitive product. The dummy variables representing seasonality were found to be statistically not significant for livestock products, with the exception of the fourth quarter for meat of swine (fresh, chilled or frozen). However, dummy variables for the grain products were statistically significant. The results show that seasonality is an important factor in determining import demand for grain products. Dummy variables included to control for outliers were not significant, nor was the dummy variable included for trade liberalisation. The value of this study is that the estimated Armington elasticities will allow researchers to evaluate more precisely the economic impacts of trade liberalisation and changes in tariffs, as well as other trade policies, in partial and general equilibrium models that include South African agriculture.